59772 03 ch03 028-037 - Cengage · © Andresr/Shutterstock.com Targeting 3 MARKETING FRAMEWORK 5Cs...

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Targeting

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MARKETING FRAMEWORK

5Cs STP 4Ps

Product

Price

Place

Promotion

Customer

Company

Context

Collaborators

Competitors

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• How do marketers choose a customer segment to target?• How does one “size” a market?

Segmentation

Targeting

Positioning

59772_03_ch03_028-037.indd 2859772_03_ch03_028-037.indd 28 1/22/09 5:08:37 PM1/22/09 5:08:37 PM

Dawn Iacobucci, MM, (Mason, OH: South-Western Cengage Learning, 2009).

29

The term target is drawn from a shooting or archery range metaphor, and it says, “We’ve got our customers in our sights; now let’s get them!” For readers who dislike business-as-war metaphors, imagine instead that we have a set of binoculars, and when we get our target segment in our sights, we use a slingshot to propel cool products and great deals at the target.

The idea of targeting is merely one of selection. We have analyzed the marketplace, our competitors, and our internal strengths, and we can see that they align better with some segments than with others. So we will try to serve the segments whose needs match our abilities to deliver, and in doing so, we hope to make very happy, very loyal customers who will be very profitable to us.

We target for the same reason that we segment—it’s foolhardy to try to be all things to all people. Most mar-kets are comprised of customers whose tastes vary; hence, we derive segments, which, in turn, results in determining which of those segments we want as our customers.

WHAT IS TARGETING, AND WHY DO MARKETERS DO IT?

At this point, we’ve done a segmentation analysis and discovered a number of variables that are workable (e.g., they’re demographics or media choices) and useful (e.g., they are tied to psychological profiles of attitudes and brand preferences). In segmentation, targeting, and positioning,the choice of which segments to target comes next.1

Marketers choose a customer segment to

target.



30 P A R T 1 Marketing Strategy

company manufactures PCs doesn’t mean we’d have any particular advantage at the e-book technology or distri-bution. So let’s not bother.

Those two cells in the matrix are the no-brainer choices. Now things get more complicated. In the low-er-left quadrant of the figure, the market looks sweet, but we’re not particularly capable (e.g., video games are profitable and growing like crazy, but we produce music CDs). A key question is whether we can develop the sufficient capabilities (e.g., hire teenage boys to do programming and pay them in CDs). Depending on how far the newly required capabilities are from our in-house capabilities, taking this path could mean a huge investment of time and money. Maybe that’s an investment we wish to make. If we’re a private company or have patient shareholders, we may have the time to develop new skills (e.g., hire new people, create new channels). Or maybe it’s an investment we’ll have to make, given that some trends, such as the growth of segments, are impossible to ignore: Providers of over-the-counter meds had to invest in more compli-cated packaging for safety assurance, Blockbuster had to adapt to the Internet and competition from Netflix, physicians have to answer patients’ questions driven by direct-to-consumer pharmaceutical ads.2 We also don’t want to create confusion across segments (e.g., how can we attract a high-end segment if the company is known to cater to less desirable customers?). Conversely, many fashion houses have started offering affordable knock-offs, which will potentially dilute the brand. (More on this later, especially in Chapter 6 on branding.)

Finally, the upper-right quadrant in Figure 3.1 indi-cates another dilemma: What if the market doesn’t look so great, but we are awesome in creating this type of prod-uct? The key question then is whether we can develop a market. Can we get a segment to understand the ben-efits of what we provide? This would require investing too: in marketing research to understand the customer’s level of knowledge and points of resistance, in possible modifications to the product to make it more appealing, and in advertising to educate the customer about these stupendous products.

We will have more to say about corporate fit in Chapter 14 on strategy, but at the moment, a simple, popular framework for trying to objectively assess one’s own corporate strengths is the SWOT analysis, depicted in Figure 3.2. SWOT stands for strengths, weaknesses, opportunities, and threats. In the “S” and “W,” we’re characterizing the company: What are our strengths and weaknesses? In the “O” and “T,” we’re character-izing the broader environment (e.g., industry, suppliers,

How Do We Choose a Segment to Target?

There are two perspectives in assessing each segment’s attractiveness in terms of its potential for our target-ing, and it is important to consider both. We will iterate between our top-down vision of corporate strategy and a bottom-up data-informed approach on segment size and profitability.

Profitability and Strategic Fit

The first perspective in assessing segments to target is a view of the segments themselves, and naturally the pri-mary question is whether it is likely that the segment will be profitable (and if it’s likely, just how profitable). Potential profitability is a function of the current market size, its anticipated growth, current and anticipated levels of competition, and customer behavior and expectations (e.g., some customer segments are high-maintenance and not worth serving).

The second perspective requires that we take a long, hard look at our own business capabilities: Does this market or segment “fit” with what we are? Are we going to be able to satisfy this segment—that is, can we pull it off? What are our strengths? What resources do we have? What is our experience, what is our corporate cul-ture, what are our current brand personalities? According to all these indicators, is it smart to investigate serving a particular segment?

Figure 3.1 captures the possibilities. In the upper-left quadrant, if a market segment looks attractive and serving that segment fits our corporate abilities, the pronounce-ment is simple, “Go for it!” For example, if we manufac-ture athletic clothing and learn that corporate volleyball teams are growing in popularity and they need team shirts with their logos, we can do that and likely be successful.

In the lower-right quadrant of Figure 3.1, if a seg-ment doesn’t look promising and it doesn’t fit naturally with us anyway, we let the opportunity go. For exam-ple, e-books have yet to take off, and just because our

F I G U R E 3 .1 Strategic Criteria for Targeting Segments

Market is

attractive

Corporate

strengths

Less

capable

Market doesn’t

look promising

Market is Market doesn’t

Go for it! Hmm...

Hmm... Avoid

Strengths

Weaknesses

Opportunities

Threats



C H A P T E R 3 Targeting 31

customers perceive our strengths vis-à-vis our competi-tors. The two dimensions of quality and price might look generic or abstract, but most attributes and benefits in many product categories can be whittled down to these two. Price is self-explanatory. The important thing to remember about quality is that the defining dimensions vary with industry. For cell phones, quality might be number of minutes in a plan and few, if any, dropped

government): What are the opportunities and threats? “S” and “W” are said to be considerations internal to the organization; “O” and “T,” external.

SWOTs are useful in clarifying most marketing ques-tions. In such an analysis, we can declare our strengths and weaknesses relative to our competitors, but our opinion doesn’t matter as much as that of the customer base. Hence, we’d obtain some marketing research data, such as the perceptual maps described in the following section. If our brands, product lines, and company have perceived weak-nesses in areas that customers care about, we should address those shortcomings. If our brands and products have per-ceived strengths, we will consider what we can do to ensure that these will be sustainable competitive advantages.

Opportunities and threats are usually driven by changes in one of the 5Cs: The economic or environ-mental context might be changing, a supplier might be morphing into a competitor, or a competitor might be offering extended services that are desired by our cus-tomers. Whether any of these shifts is perceived as a threat or an opportunity depends a bit on corporate philosophy: Is the glass half empty or half full? Are we flexible enough to respond and react, thus seeing the changes on the horizon as opportunities? Or are we bureaucratic or not very creative, reacting pessimisti-cally to the changes as threats?

We will return to SWOTs, particularly when consider-ing marketing strategy. In the following section, we begin to see how the relative strengths and weaknesses may be determined, as seen through the customer’s lens.

Competitive Comparisons

When we attempt to assess our corporate strengths, as in Figure 3.1, we try to create an absolute measure. How-ever, in terms of the minds of our customers, or ultimately their purchase choices, what may be more relevant (and easier) is to assess our corporate strengths relative to those of our competitors.

Figure 3.3 is an example of a competitive analy-sis, called a perceptual map. This map shows where

Favorable

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External

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UnfavorableFavorable Unfavorable

Strengths Weaknesses

Opportunities Threats

F I G U R E 3 .2 SWOT: Strengths, Weaknesses,Opportunities, and Threats

Low

High

Qua

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Low

High priceLow High price

Competitor 2

Competitor 1

Competitor 4

Competitor 3

Us

F I G U R E 3 .3 Competitive Analysis

In the airline industry, a quality that is

important to customers is the friendliness of

the frontline staff.

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weaknesses too: It’s not a huge market; it’s not growing the fastest; and, ultimately, it’s not a great fit with our cor-porate abilities.

Segment 4 is one we can quickly eliminate. It’s the smallest and the slowest growing, and regardless of any level of competition, we wouldn’t know what to do in that market anyway.

Segment 1 should be our priority. If it is large enough for our goals, we’re good. But if Segment 1 is too small, we might consider expanding our targeting to include Segment 2 or Segment 3 or both of them. We could roll out and target the segments sequentially, after we’ve spent the necessary resources to reach and penetrate Segment 1 as long as we can produce a consistent market offering and communicate to additional segments without alienat-ing customers in Segment 1.

We began this section by saying that the choice of a target segment involves information about the size of the market and the fit with corporate goals. In many ways, the second is more challenging (e.g., it’s easy to get swept away by a big segment, making us think we should serve it, when, in fact, we may have no particular strengths to guarantee that we can serve it well and we should say no). Ultimately, that assessment is conceptual—who we are as a firm and who we want to be. However, the other piece of information (the size of a market segment) is something we can estimate, which we see how to do next.

SIZING MARKETS

In Figure 3.4, we see segments described in terms of mar-ket size and likely growth rate. The inquiring marketer is no doubt wondering how we derive such characterizations. We turn now to sizing markets and then discuss projecting growth rates.

We’ll walk through a couple of scenarios of creating esti-mates to help us understand the logic. You’ll see that some of the inputs into these estimates are numbers you’re con-fident about. For the numbers you’re less confident about, you probably should do some what-if scenarios, varying the numbers, seeing how sensitive the ultimate projec-tions are, and seeing the likely upper and lower bounds on your predictions. Because many estimates go into the final calculation, each component needs to be as precise as possi-ble; otherwise, the errors in the estimation get compounded. Something to consider is that the more precisely defined the target market is, the easier the numbers are to estimate.

We’re going to look at two examples of estimating the size of a market—the first is selling uniform pants to high school football teams; the other is estimating the demand for acrylic nails. We’ll close with a general illustration of the kinds of factors you’d include for estimating your par-ticular product-segment market size.

calls. For airlines, quality might be convenience (e.g., number of flights), on-time arrivals, baggage arrival rates, and friendly frontline staff (at check-in and in the air). For bookstores, quality might be a large variety at stores such as Barnes & Noble or depth of category at stores that specialize in, say, mystery novels.

In the market depicted in Figure 3.3, there is good news and bad. We aren’t seen as the worst provider or the most expensive. But neither are we seen as terrific in either regard. We are viewed as relatively average on qual-ity and on price. We dominate Competitor 3 on quality and Competitor 4 on price. However, we are dominated by Competitor 1 on quality and Competitor 2 on price.

What does this information tell us with respect to target-ing? If a segment we are considering as a target is price-sen-sitive, we have to be especially wary that Competitor 2 will react—it will be attuned to such a move in the marketplace because it owns that price point identity, and because price is its strength, it can and probably will react swiftly. In all likelihood, Competitor 2 will kick our, er, win. Similarly, if we are considering targeting a segment that values quality, weprobably have to be concerned with Competitor 1 more than any of the others.

In Figure 3.4, we see a comparison along segment profiles to give us a sense of the business parameters and their likely attractiveness. Regarding Segment 1, it’s not the largest existing market—2 and 4 are bigger. But it’s growing the fastest, which makes the market exciting. However, that growth can be a double-edged sword. Although few competitors exist at the moment, if the market grows big enough, more competitors will be attracted to it. At least as important in terms of mak-ing this a priority segment for our firm is that it fits well with what we do. So even if more competitors enter the marketplace, we should be able to handle them because we know we can serve this segment well.

Segment 2 has possibilities. It looks attractive because it’s a big market and it’s growing reasonably quickly. Two issues give us pause: There is one dominant competitor that may be daunting, and it’s not our best corporate fit.

Segment 3 has its strengths (e.g., few competitors, existing competitors that are beatable). But it has its

F I G U R E 3 .4 Strategic Segment Comparison

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Characteristics:

Growth Competitors Fit Priority?

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p y

$1m Yes

$2m OK

$1m OK

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Few, weak

Few, weak No

??




How Many High School Football Pants?

Imagine you’re a newly minted B-school grad mak-ing zillions consulting for McKinsey. Your brother is impressed and asks for your advice. He and his busi-ness partner have a start-up company that sells football uniforms, and they want your help in estimating how much they can sell in a cou-ple of different markets. Your brother’s business partner lives in Dallas and says that he can drive to the schools there and make a “mint” for himself and your brother. Your brother asks, “What’s a mint?” You’re going to help him size this market. Here’s how.

They have some background stats, and you go online to find more. It turns out that football, like everything else in Texas, is big. Dallas County has 85 high schools, and its largest school district has 33 high schools edu-cating approximately 40,000 students. (The average high school has approximately 1212 students: 60% Hispanic, 30% African American, 6% white, 4% other.)3 A sales-person in the Dallas high school market would quickly

FiorinaIn Carly Fiorina’s book Tough Choices, she talks about what level of precision in various estimates

was necessary in an entrepreneurial setting that made decisions on estimates that were deemed

“roughly right” vs. a more conservative corporate culture that needed estimates to be “perfect

enough.” Sometimes you too will find yourself in situations where the numbers are reliable and the

estimates fairly precise. That’s a comforting scenario from which to launch a strategy or tactic. At

other times, you’ll be in situations where the numbers aren’t perfect, yet the marketplace is moving,

demanding a decision. If you can get better numbers quickly, do so. If not, go with what you know.

learn that most (90%) of these schools are large enough to have a varsity football team (usually seniors and juniors) and a junior varsity team (usually sophomores and freshman). Varsity has 40 players on its rosters, and junior varsity has about 35.

Each player is given two pairs of game pants (one light and one dark—for home and away games, respectively) and, on average, 1.5 pairs of practice pants. (About 50% of the players make one pair last all season, and 50% go through two pairs.)

So the total number of pants that could be sold in one season, or the full market potential, would be as follows: 33 high schools � 90% � (40 � 35 players) � (2 � 1.5 pairs of pants) � 7796.25 pairs of pants. (These numbers are summarized in Figure 3.5.)

Is this a “cha-ching” opportu-nity? The pants are priced at $75. (Actually, they’re quoted at $100, but quantity discounts are given to each team.) The contribution to the pants manufacturer ($35) times the number of pairs of pants to cover the market yields $272,868.75.

For comparison, consider the 85 high schools in the broader Dallas County, comprising roughly 103,020 students—or 5737.50 players (85 �

90% � 75) and 20,081.25 pairs of pants (5737.50 � 3.5), which totals $702,843.75 (20,081.25 � $35). For a different comparison, consider football in South Dakota. There are 198 high schools in the entire state. High school enrollment in these schools totals 35,325, for an average school size of 198. If 85% of these schools can put together a varsity team of about 35 players, the market is as follows: 198 �

85% � 35 � 3.5 � 20,616.75, or $721,586.25. (Note: We might have to adjust the $35 margin downward

Estimating sales of football pants can help a company decide

whether the market is worth pursuing.

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How Many Acrylic Nails?

Okay, ladies, equal time. Here’s another scenario: You want to impress your favorite aunt using your newfound B-school knowledge. She is about to retire and wants to work as a receptionist at a friend’s nail salon. Your aunt’s friend is thinking about specializing in applying acrylic nails and is wondering if the salon can be profitable. Your question is whether the market is big enough.

Applying acrylic nails is a service that a diverse set of customers seeks—yes, they are usually women, but the customers are any age and income level. There are two segments: (1) women who get these nails infrequently, specifically once or twice a year (the average then is 1.5), usually for some fun, celebratory event, and (2) frequent users who wear these nails essentially continuously. One set of nails can be maintained for six weeks; then a new set needs to be applied. So new nails have to be put on eight or nine times a year (8.5 times on average).

In Figure 3.6, we see the basic analysis of the poten-tial number of women who might become customers of a nail salon. Three cities are compared because your aunt’s friend is unsure whether to stay in Milwaukee or “retire” to a warmer climate, Atlanta or Phoenix. So the city popula-tions are noted first. These current population estimates are from census.gov. They should probably be supplemented with surrounding suburban ZIP Codes, but this beginning will show us the market sizing estimation process.

Next, assume roughly half the population in each city is women and your aunt knows the industry statistics indicating that only about 5% of women are interested in wearing acrylic nails. So for each city, the guesstimate on the size of acrylic nail wearers is (city population) � 50% (women) � 5% (number of artificial nail wearers).

Figure 3.7 is a refinement of these estimates, where the 1:2 split on infrequent: frequent nail wearers is also estimated from industry stats. This industry ratio isn’t very precise, but it’s all you have to work with. If you want, you can plug in other numbers (20:80, 40:60, etc.) and look at the resulting what-if scenarios. Continuing with the 33:67 split and the average number of nail applications mentioned previously (8.5 and 1.5 for the frequent and infrequent, respectively), we see how many nail applica-tions would comprise the market. Thus, take the previous

because these high schools are not located in a concen-trated area like the city of Dallas, which means sales managers have to travel farther to reach all these accounts.)

Whether these numbers are big enough to be attrac-tive to your company is your call. But this is how you do the estimates.

F I G U R E 3 .5 Market Sizing: Dallas High School Football Uniform Pants

• The largest Dallas County school district has 33 high schools.

• 90% of high school have both varsity (40 players) and junior varsity football teams (35 players).

• Each player gets two pairs of game pants.

• Each player gets, on average, 1.5 pairs of practice pants.

So market potential is as follows: 33 high schools x 90% x (40 + 35 players) x (2 + 1.5 pairs of pants) = 7796.25 pairs of pants

F I G U R E 3 .6 Market Sizing: Cities for AcrylicNails Part 1: Users

City Population x50% x5% (acrylic (women) nail users)Atlanta 471,000 235,500 11,775Milwaukee 579,000 289,500 14,475Phoenix 1,462,000 731,000 36,550

Targeting YogisA cataloger known for its environmentally friendly goods and body–soul philosophy is considering add-ing yoga clothes to its line. Data on fitness lines in the apparel industry suggest customers may be segmented into the following (exclusive and exhaustive) categories. The approximate proportion of customers of each type are noted.

• 30% college students • 20% stay-at-home moms • 20% introverts• 15% men postcardiac surgery• 10% women aged 20–30• 5% men aged 20–30

A consultant told the cataloger to “follow the money,” meaning to go after the three biggest segments to cap-ture the majority of the market: the college students, stay-at-home moms, and introverts. The cataloger agreed in spirit with “follow the money” but supple-mented information on this segment size with rough profitability estimates and guesstimates at likely seg-ment growth rates. It went after the men postcardiac surgery; they are small in number but easy to find and are devoted in following and have plenty of cash. The cataloger hasn’t looked back.




to the yellow pages at Yahoo.com and search “nail salon,” we get leads on each city: Atlanta (20), Milwaukee (16), and Phoenix (21). These numbers look ridiculously small, and further, they’re not even in proportion to the cities’ populations. If we broaden the search to “beauty salon,” we get more likely competitors: Atlanta (144), Milwaukee (62), and Phoenix (170).

Finally, we have no clue yet on the likely profitability of each market. We haven’t talked about how to price, so we can put this discussion off for now. For the moment, we might assume that the profitability per customer would be roughly the same in each of these cities; thus, although we don’t know how to translate the numbers (e.g., 33,031) into dollars, whatever that transformation, we can assume the equation is the same for all the numbers in Figure 3.7.

One big difference between manufacturing high school football pants and applying acrylic nails is that the former is more of a “good” and the latter is more of a “service.” As this comparison illustrates, when compared to goods, services are usually associated with more variable costs. If our fixed costs on the football pants included a plant, machines, and employees, our variable costs would include things such as the pants’ material. In the nail salon, a fixed cost would be the shop and equipment, but many materials and the employees would be variable costs because, as the salon’s business takes off, we’d need a bigger staff.

If you’re a B2B seller, market sizing can be a little easier. The census.gov site cross-classifies businesses by sector (e.g.,

estimates (e.g., (city population) � 50% (women) � 5% (number of acrylic nail wearers)) and further multiply by 33% and 8.5 applications or 67% and 1.5 applications.

Growth. We began this chapter by discussing a num-ber of criteria that together make a market more or less attractive. This analysis is only about market size so far. We have not considered growth, but we could probably assume population growth will be greater for Atlanta and Phoenix, given the migration of the baby boom-ers to the south and southwest. (Of course, that’s not to say that the need for acrylic nails will grow for these retirees.)

It’s a little risky to extrapo-late and predict growth, but a smart technique would be to obtain sales data in this indus-try for the past three or four or ten years and extrapolate through a moving average. A three-year moving aver-age would take the data from years 1, 2, and 3 and compute a mean; years 2, 3, and 4 and compute a mean; years 3, 4, and 5 and compute a mean; etc. Then you’d fit a curve to these data (e.g., via regres-sion). The idea is that includ-ing data for the surrounding years helps stabilize the esti-mates. If an unusual year is in the series somewhere, it doesn’t unduly influence the prediction of the future.

We also have no clue on competitors yet. One quick analysis would be to look at local yellow pages. If we go

F I G U R E 3 .7 Market Sizing: Cities for Acrylic Nails Part 2: Usage Segments

#in #nailCity #users segment applications Totals

Atlanta 11,775 frequent (33%) 3886 x 8.5 � 33,031 44,865 infrequent (67%) 7889 x 1.5 � 11,834Milwaukee 14,475 frequent 4777 x 8.5 � 40,605 55,152 infrequent 9698 x 1.5 � 14,547Phoenix 36,550 frequent 12,062 x 8.5 � 102,527 139,259 infrequent 24,488 x 1.5 � 36,732

Compared to a business that provides goods, a service-oriented business has

more variable costs.

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In any event, whether you’re working B2B or B2C, the logic in market sizing estimation is always the same. Start with the total population and break it down into relevant proportions.

One way marketers have approached this analysis is by estimating the purchase decision-making process—the ele-ments of awareness, trial, repeat, etc. For example, the first cut would be to take the total population and multiply it by the percentage of customers who are aware of our brand and compute: population � %aware. Next, ask what pro-portion of customers has tried our brand? Then ask how we are doing with regard to repeat purchasers. So far, this logic looks like the following string of proportions:

population � %aware � %trial � %repeat

We could drill down further by asking how much each customer tends to buy when he or she buys. Then our analysis resembles the following:

(population � %aware � %trial � %repeat) � per annum purchase

Translating this per customer annual consumption into dollars is easy—just multiply the number by the average retail price paid.

Market sizing isn’t difficult. Good demographic data exist for consumers and businesses, for U.S. and interna-tional markets. The final probability estimates in these examples require additional information (e.g., industry knowledge or data obtained from surveyed customers).

Determining which segments to target depends on an interplay of two factors: (1) quantitative issues such as size of segment, profitability, and growth and (2) stra-tegic issues, primarily the fit of the segment needing to incorporate philosophy and intended positioning. We have focused on target sizing in this chapter. Profitabil-ity is covered in Chapter 12 on customer satisfaction and loyalty.

NAICS codes) and size (e.g., sales or number of employees). If you produce the spandex that the football pants are made of, the industries to which you could sell would be limited only by your imagination. You could sell spandex to other athletic wear manufacturers (e.g., swimwear, dance wear), lingerie producers, luggage manufacturers, or medical sup-pliers as a medium for stretchy organ replacement.

Targeting Tummies to Be TuckedA U.S. medical group with a specialty in plastic surgery decided to focus on tummy tucks, reasoning that this service would be in demand as baby boomers age. The professionals were excellent in their medical service, but, not surprisingly, less informed about business and marketing. They also didn’t want to spend much money on advertising. Looking at the medical group’s records covering its last two years of service, these are the number of patients in each gender and age group:

• Men, 21–40: 1• Men, 41–60: 9• Men, 61–80: 1• Women, 21–40: 15• Women, 41–60: 31• Women, 61–80: 3

The center avoids patients over 80 for health reasons and those under 21 for what it considers to be moral and ethical reasons. The center chose to target men aged 41–60, arguing them as being profitable (greatest discretionary funds), and women aged 61–80, arguing them as the growing boomer segment. Do you agree with the center’s stra-tegic choice of target segments? Why or why not?

E n d n o t e s

Tillmann Wagner (Texas Tech), and Bruce Weinberg (Bentley) for their helpful feedback.

2. You’ll see in your career that sometimes the answers to these questions have more to do with corporate politics and egos than good business sense. For example, a CEO might want to create a product to enter a high-end segment to provide the company with a little

more caché in its product portfolio, even though the company is known for low-cost, low-quality goods.

3. These stats can be found online (e.g., even at Wikipedia) by searching for the number of high schools in Dallas, Texas.

1. Thanks to Professors Desislava Budeva (Florida Atlantic), Robin Coulter (UConn), Jennifer Escalas (Vanderbilt), Gavan Fitzsimons (Duke), Harry Harmon (U Central Missouri), Devon Johnson (Northeastern), Ann Little (High Point U), Chip Miller (Drake U), Nicolas Papadopoulos (Carleton), Anthony Peloso (ASU), Donald Shifter (Fontbonne U),



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I n R e v i e wCHAPTER 3

Discussion Questions

1. Universities have public records with descriptive statistics on

student body demographics. Use your school’s data to size the

possible market for vending machines that dispense DVD rent-

als, flavored coffees, or packets of NoDoze®.

2. Use the NAICS (North American Industry Classification System) data

(www.census.gov/epcd/www/naics) and population data (www.

census.gov) to find components of market sizing estimates.

a. You manage a large, national retail convenience store with a

small pharmacy. You’re considering opening a no-appointment

health care clinic. The industry indicates that customers/

patients who frequent these clinics typically are uninsured.

Where are the high-priority locations at which these clinics

should be located?

b. You manage a business equipment refurbishing company. Your

drivers go to businesses for pickups. The old equipment is

taken to your warehouses/rehab center. The renovated equip-

ment is redistributed to companies, government agencies, and

school systems. Considering the likely characteristics of this

equipment (not state of the art, not terribly expensive), where

should you locate your warehouses?

Marketing Plan Questions

Targeting:

Estimate size and profitability (lifetime customer value) of segments. Target1

Characterize fit with corporate and marketing strategy of each segment. Target2

Using financial and strategic information, rank desirability of segments. Target3

MARKETING FRAMEWORK

5Cs STP 4Ps

Product

Price

Place

Promotion

Customer

Company

Context

Collaborators

Competitors

Pla

Proators

tors

• How do marketers choose a customer segment to target?• How does one “size” a market?

Segmentation

Targeting

Positioning

Summary

To summarize the key concepts of targeting:

>> Choosing the market segment(s) to serve involves iterating

between visions relating to corporate fit and information about

segment size and likely profitability.

>> Marketers find SWOT analyses helpful—ask your company,

“What are our strengths and weaknesses?” And ask the

industry in general, “What are the opportunities and threats?”

>> Segment sizing is relatively straightforward—many

secondary data help get the probabilities started (e.g.,

demographics at the B2B or B2C level), and customer

survey data on attitudes and preferences and likely

behavioral data (past purchasing) can smooth out the

remainder of the estimation.

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I n R e v i e wCHAPTER 3

GoodBite is interested in selling a new form of teeth-whitening

strips. They dissolve in your mouth, leaving less residue than current

competitors’ products.

Whitening strips appeal to people 20–29 years old. Competi-

tors’ data on existing strips suggest that they appeal to women

slightly more than to men. For the moment, however, we’re not

planning to differentiate on gender in the advertising. So let’s ignore

gender and just consider the 20- to 29-year-old age category.

Say the U.S. population is 270 million, with 41.1 million in that

age bracket. About 7.5 million people have tried competitors’ whit-

ening strips (GoodBites aren’t on the market yet), and there are

roughly 3 million frequent users.

GoodBite is trying to guesstimate the size and likely profit-

ability of its target market. The GoodBite product will be sold in

packages of fourteen sets of strips per box (each set is an upper

and lower pair).

GoodBite isn’t sure yet of the frequency with which a typical pur-

chaser will buy a set, as the product category is still relatively new.

However, as an upper bound, it reasons that a consumer would buy

about twenty-six boxes a year (fifty-two weeks per year divided by

the two weeks’ supply in each box). A more conservative estimate is

half that number (thirteen boxes; roughly one per month). An even

more conservative estimate is that a customer would buy a couple

boxes (two or three) a year.

GoodBite expects to charge $25 per box.

1. Should the company launch GoodBites?

2. What assumptions were made that might be revisited?

A large Boston-based consulting agency frequently conducts seg-

mentation studies for its clients. The following segmentation data

assist the agency in advising two clients. Each Venn diagram

describes demographic and psychographic findings. Figure A depicts

the proportion of a recent sample of shoppers at a national grocer

that indicated interest in a new gourmet LeanCuisine® product.

Figure B depicts the proportion of owners of a game console

(obtained from registration cards of the base system) that indicated

interest in a new game.

If you worked at this consulting agency, which segments would

you suggest that each client target? Why?

Mini-Case 2: Gourmet LeanCuisine® and Gaming Software

Education Males22–35

Males9–12

Males13–21

Females 13–35 Females

9–12

Segmentation Data A

Singlewomen

Single men, Over 50

Familieswith 2+children

Extraverts

Collegemen

Upper middleclass

Segmentation Data B

Mini-Case 1: GoodBite

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