Essentials of Marketing MKT 333

Chapter 8 - Slide Chapter 8 - Slide 11 © 1998 South-Western College Publishing1998 South-Western College Publishing

Essentials of MarketingMKT 333

Essentials of MarketingMKT 333

Chapter 3: Market Chapter 3: Market Segmentation, Targeting, and Segmentation, Targeting, and

Positioning StrategiesPositioning Strategies

Chapter 3: Market Chapter 3: Market Segmentation, Targeting, and Segmentation, Targeting, and

Positioning StrategiesPositioning Strategies


What is a Market?

A group of actual or potential customers A group of actual or potential customers for a particular product.for a particular product.

A market has:A market has: Purchasing powerPurchasing power Willingness to spend moneyWillingness to spend money Authority to spend moneyAuthority to spend money

A group of actual or potential customers A group of actual or potential customers for a particular product.for a particular product.

A market has:A market has: Purchasing powerPurchasing power Willingness to spend moneyWillingness to spend money Authority to spend moneyAuthority to spend money


Competitive AdvantageCompetitive Advantage

Superiority to or favorable difference from Superiority to or favorable difference from competitors along some dimension competitors along some dimension

important to the market.important to the market.

Two Approaches:Two Approaches: Price leadership strategyPrice leadership strategy Differentiation strategyDifferentiation strategy

Superiority to or favorable difference from Superiority to or favorable difference from competitors along some dimension competitors along some dimension

important to the market.important to the market.

Two Approaches:Two Approaches: Price leadership strategyPrice leadership strategy Differentiation strategyDifferentiation strategy


Price Leadership StrategyPrice Leadership Strategy

Emphasizes underpricing all competitorsEmphasizes underpricing all competitors

A price leader:A price leader: Has the lowest per unit costsHas the lowest per unit costs Generates large volume salesGenerates large volume sales Examples: Wal-Mart, Southwest Airlines, Examples: Wal-Mart, Southwest Airlines,

Bic pensBic pens

Emphasizes underpricing all competitorsEmphasizes underpricing all competitors

A price leader:A price leader: Has the lowest per unit costsHas the lowest per unit costs Generates large volume salesGenerates large volume sales Examples: Wal-Mart, Southwest Airlines, Examples: Wal-Mart, Southwest Airlines,

Bic pensBic pens


Differentiation StrategyDifferentiation Strategy

Product is unique and offers distinct Product is unique and offers distinct advantage or is set apart in ways other advantage or is set apart in ways other

than price.than price. Examples: Scotch-Brite steel wool pads, Examples: Scotch-Brite steel wool pads,

Apple ComputerApple Computer

Product is unique and offers distinct Product is unique and offers distinct advantage or is set apart in ways other advantage or is set apart in ways other

than price.than price. Examples: Scotch-Brite steel wool pads, Examples: Scotch-Brite steel wool pads,

Apple ComputerApple Computer


Market/Product MatrixMarket/Product Matrix

Old/ExistingMarkets

Old/ExistingProducts

MARKETMARKETPENETRATIONPENETRATION



Old/ExistingMarkets



NewMarkets

MARKETMARKETDEVELOPMENTDEVELOPMENT



Old/ExistingMarkets



NewMarkets


NewProducts

PRODUCTPRODUCTDEVELOPMENTDEVELOPMENT



Old/ExistingMarkets

NewMarkets


NewProducts




DIVERSIFI-DIVERSIFI-CATIONCATION


What is Market Segmentation?What is Market Segmentation?

Dividing a heterogeneous market into a Dividing a heterogeneous market into a number of smaller, homogeneous number of smaller, homogeneous

submarkets.submarkets.

Dividing a heterogeneous market into a Dividing a heterogeneous market into a number of smaller, homogeneous number of smaller, homogeneous

submarkets.submarkets.Mass MarketMass Market Market SegmentationMarket Segmentation


The Goal of SegmentationThe Goal of Segmentation

To identify groups of To identify groups of people who will people who will respond similarly to respond similarly to a marketing strategya marketing strategy

To identify groups of To identify groups of people who will people who will respond similarly to respond similarly to a marketing strategya marketing strategy


Commonly Used Bases for SegmentationCommonly Used Bases for Segmentation

Demographic informationDemographic information socio-economic factorssocio-economic factors geographic/geodemographic informationgeographic/geodemographic information consumer behavior patternsconsumer behavior patterns

consumption patternsconsumption patterns benefits desiredbenefits desired

PsychographicsPsychographics

Demographic informationDemographic information socio-economic factorssocio-economic factors geographic/geodemographic informationgeographic/geodemographic information consumer behavior patternsconsumer behavior patterns

consumption patternsconsumption patterns benefits desiredbenefits desired

PsychographicsPsychographics


Segmenting Consumer Markets: DemographicSegmenting Consumer Markets: Demographic

Demographic Demographic Segmentation:Segmentation:

AgeAge SexSex Race and ethnicityRace and ethnicity Family life cycleFamily life cycle Marital statusMarital status Family sizeFamily size

Demographic Demographic Segmentation:Segmentation:

AgeAge SexSex Race and ethnicityRace and ethnicity Family life cycleFamily life cycle Marital statusMarital status Family sizeFamily size


Men and Women Differ in their Responses to Marketing CommunicationMen and Women Differ in their Responses to Marketing Communication

Insurance: You would feel more Insurance: You would feel more comfortable knowing you will comfortable knowing you will have the security of an income have the security of an income within 30 days of your injury, within 30 days of your injury, don’t you think?don’t you think?

Cars: You have the safety of Cars: You have the safety of knowing that this car was rated knowing that this car was rated as one of the most reliable as one of the most reliable performers.performers.

Computers: I recommend a Computers: I recommend a faster machine so you don’t faster machine so you don’t have to wait a long rime for the have to wait a long rime for the information to appear on the information to appear on the screen and enough capacity for screen and enough capacity for your graphic displays.your graphic displays.

Insurance: You would feel more Insurance: You would feel more comfortable knowing you will comfortable knowing you will have the security of an income have the security of an income within 30 days of your injury, within 30 days of your injury, don’t you think?don’t you think?

Cars: You have the safety of Cars: You have the safety of knowing that this car was rated knowing that this car was rated as one of the most reliable as one of the most reliable performers.performers.

Computers: I recommend a Computers: I recommend a faster machine so you don’t faster machine so you don’t have to wait a long rime for the have to wait a long rime for the information to appear on the information to appear on the screen and enough capacity for screen and enough capacity for your graphic displays.your graphic displays.

Insurance: For only $36 Insurance: For only $36 dollars a month, a fraction dollars a month, a fraction more than a dollar a day, you more than a dollar a day, you can be guaranteed an income can be guaranteed an income for the rest of your life if you for the rest of your life if you become injured.become injured.

Cars: The sleek aerodynamic Cars: The sleek aerodynamic design make this car an design make this car an outstanding performer.outstanding performer.

Computers: In order to get Computers: In order to get real performance, you’ll want real performance, you’ll want at least a Pentium 150 with 16 at least a Pentium 150 with 16 megs of RAM and a 1.6 gig megs of RAM and a 1.6 gig hard drive.hard drive.

Insurance: For only $36 Insurance: For only $36 dollars a month, a fraction dollars a month, a fraction more than a dollar a day, you more than a dollar a day, you can be guaranteed an income can be guaranteed an income for the rest of your life if you for the rest of your life if you become injured.become injured.

Cars: The sleek aerodynamic Cars: The sleek aerodynamic design make this car an design make this car an outstanding performer.outstanding performer.

Computers: In order to get Computers: In order to get real performance, you’ll want real performance, you’ll want at least a Pentium 150 with 16 at least a Pentium 150 with 16 megs of RAM and a 1.6 gig megs of RAM and a 1.6 gig hard drive.hard drive.


Men and Women Differ (cont.)Men and Women Differ (cont.)

Financial Services: Let’s work Financial Services: Let’s work together to develop a plan together to develop a plan that will make you feel that will make you feel comfortable if you decide to comfortable if you decide to retire at age 65retire at age 65

Newsletters: This newsletter Newsletters: This newsletter will facilitate a better will facilitate a better understanding and understanding and communication between you communication between you and your staff.and your staff.

Financial Services: Let’s work Financial Services: Let’s work together to develop a plan together to develop a plan that will make you feel that will make you feel comfortable if you decide to comfortable if you decide to retire at age 65retire at age 65

Newsletters: This newsletter Newsletters: This newsletter will facilitate a better will facilitate a better understanding and understanding and communication between you communication between you and your staff.and your staff.

Financial Services: You will Financial Services: You will need to set aside X amount of need to set aside X amount of money a year in order to money a year in order to retire to a comfortable retire to a comfortable lifestyle.lifestyle.

Newsletter: The information Newsletter: The information in this newsletter will make in this newsletter will make you an expert in your field, so you an expert in your field, so you can more easily direct you can more easily direct your staff.your staff.

Financial Services: You will Financial Services: You will need to set aside X amount of need to set aside X amount of money a year in order to money a year in order to retire to a comfortable retire to a comfortable lifestyle.lifestyle.

Newsletter: The information Newsletter: The information in this newsletter will make in this newsletter will make you an expert in your field, so you an expert in your field, so you can more easily direct you can more easily direct your staff.your staff.


Segmenting Consumer Markets: SocioeconomicSegmenting Consumer Markets: Socioeconomic

Socioeconomic Socioeconomic Segmentation:Segmentation:

OccupationOccupation EducationEducation IncomeIncome Social classSocial class

Socioeconomic Socioeconomic Segmentation:Segmentation:

OccupationOccupation EducationEducation IncomeIncome Social classSocial class


Segmenting Consumer Markets: GeographicSegmenting Consumer Markets: Geographic

Geographic Geographic Segmentation:Segmentation:

ContinentContinent Political boundariesPolitical boundaries Cultural regionsCultural regions Metropolitan areasMetropolitan areas Climatic regionsClimatic regions

Geographic Geographic Segmentation:Segmentation:

ContinentContinent Political boundariesPolitical boundaries Cultural regionsCultural regions Metropolitan areasMetropolitan areas Climatic regionsClimatic regions


Segmenting Consumer Markets: GeodemographicSegmenting Consumer Markets: Geodemographic

Geodemographic Geodemographic Segmentation:Segmentation:

Combination of Combination of geographic and geographic and demographic variablesdemographic variables

Example: zip codes in Example: zip codes in PRIZM systemPRIZM system

Geodemographic Geodemographic Segmentation:Segmentation:

Combination of Combination of geographic and geographic and demographic variablesdemographic variables

Example: zip codes in Example: zip codes in PRIZM systemPRIZM system

BeverlyBeverlyHillsHills

9021090210


Segmenting Consumer Markets: Behavior PatternsSegmenting Consumer Markets: Behavior Patterns

Segmenting by Behavior Segmenting by Behavior Patterns:Patterns:

Heavy users vs. Heavy users vs. infrequent usersinfrequent users

Purchasing habitsPurchasing habits Loyalty to brandLoyalty to brand Benefit expectedBenefit expected Importance of priceImportance of price

Segmenting by Behavior Segmenting by Behavior Patterns:Patterns:

Heavy users vs. Heavy users vs. infrequent usersinfrequent users

Purchasing habitsPurchasing habits Loyalty to brandLoyalty to brand Benefit expectedBenefit expected Importance of priceImportance of price


Segmenting Consumer Markets: Psychographic/LifestyleSegmenting Consumer Markets: Psychographic/Lifestyle

Psychographic/lifestyle Psychographic/lifestyle Segmentation:Segmentation:

ActivitiesActivities InterestsInterests OpinionsOpinions ValuesValues

Psychographic/lifestyle Psychographic/lifestyle Segmentation:Segmentation:

ActivitiesActivities InterestsInterests OpinionsOpinions ValuesValues


Segmenting Business MarketsSegmenting Business Markets

Segmentation variables:Segmentation variables: GeographicGeographic Organizational Organizational

characteristicscharacteristics Purchase behavior and Purchase behavior and

usage patternsusage patterns Organizational Organizational

predisposition or policypredisposition or policy

Segmentation variables:Segmentation variables: GeographicGeographic Organizational Organizational

characteristicscharacteristics Purchase behavior and Purchase behavior and

usage patternsusage patterns Organizational Organizational

predisposition or policypredisposition or policy


Steps in Segmenting and Selecting Target MarketsSteps in Segmenting and Selecting Target Markets

Step 1:Step 1:Break marketBreak marketinto componentinto componentpartsparts

Step 2:Step 2:Regroup intoRegroup intomarket segmentsmarket segments

Step 3:Step 3:Select whichSelect whichsegment(s) tosegment(s) totargettarget

HeterogeneousHeterogeneouscustomerscustomers

IndividualIndividualcustomerscustomers

HomogeneousHomogeneousmarketmarket

segmentssegments

TargetTargetmarketmarket


Target MarketTarget Market

The market segment toward which the The market segment toward which the organization decides to direct its organization decides to direct its

marketing plan.marketing plan.

The market segment toward which the The market segment toward which the organization decides to direct its organization decides to direct its

marketing plan.marketing plan.

TargetTargetMarketMarket


Strategies for Target MarketingStrategies for Target Marketing

Four Strategies:Four Strategies:

UndifferentiatedUndifferentiatedMarketingMarketing

ConcentratedConcentratedMarketingMarketing

DifferentiatedDifferentiatedMarketingMarketing

CustomCustomMarketingMarketing


Undifferentiated MarketingUndifferentiated Marketing

Appeal to a broad range of customers.Appeal to a broad range of customers.Appeal to a broad range of customers.Appeal to a broad range of customers.

A small storeA small storein an isolatedin an isolatedtowntown

•ProductProduct•PricePrice•DistributionDistribution•PromotionPromotion

EverybodyEverybody

Marketing Marketing organizationorganization

MarketingMarketingmixmix

TargetTargetmarketmarket


Concentrated MarketingConcentrated Marketing

Zeroing in on a single target market.Zeroing in on a single target market.Zeroing in on a single target market.Zeroing in on a single target market.

LargeLargechain sawchain sawmanufacturermanufacturer

LargeLargechain sawchain sawmanufacturermanufacturer



Marketing Marketing organizationorganization

MarketingMarketingmixmix

SuburbanSuburbanusersusers

Lumber-Lumber-jacksjacks

FarmFarmusersusers


Differentiated StrategyDifferentiated Strategy

Select more than one target market and Select more than one target market and develop a separate marketing mix for develop a separate marketing mix for

each.each.

Select more than one target market and Select more than one target market and develop a separate marketing mix for develop a separate marketing mix for

each.each.


Differentiated Strategy: Example of ClairolDifferentiated Strategy: Example of Clairol

ClairolClairol

MarketingMarketingOrganizationOrganization

SeveralSeveralmarketing mixesmarketing mixes

Clairol Option for MenClairol Option for Men

Clairol Loving Care Clairol Loving Care

Clairol Ultress Clairol Ultress

Miss Clairol Miss Clairol

Clairol Frost & Tip Clairol Frost & Tip

Men with gray hairMen with gray hair

Middle aged women Middle aged women

Prestige-oriented womenPrestige-oriented women

Brand loyal usersBrand loyal users

Young womenYoung women

Target marketTarget marketsegmentsegment


Custom MarketingCustom Marketing

Marketer seeks to satisfy each customer’s Marketer seeks to satisfy each customer’s unique set of needs.unique set of needs.

Marketer seeks to satisfy each customer’s Marketer seeks to satisfy each customer’s unique set of needs.unique set of needs.


Custom StrategyCustom Strategy

IndustrialIndustrialrobotsrobotsmainte-mainte-nancenance

MarketingMarketingOrganizationOrganization

Individual Individual marketing mixmarketing mix

for each customerfor each customer

Marketing mix #1Marketing mix #1




Customer #1Customer #1




IndividualIndividualcustomerscustomers


PositioningPositioning

What do we want our What do we want our customers to think customers to think about our products?about our products?

How should it How should it compare to our compare to our competitor’s competitor’s products?products?

What do we want our What do we want our customers to think customers to think about our products?about our products?

How should it How should it compare to our compare to our competitor’s competitor’s products?products?


PositioningPositioning

Market position: Market position: The way consumers The way consumers perceive the brand relative to its perceive the brand relative to its

competition.competition. Head-to-head competitionHead-to-head competition RepositioningRepositioning

Market position: Market position: The way consumers The way consumers perceive the brand relative to its perceive the brand relative to its

competition.competition. Head-to-head competitionHead-to-head competition RepositioningRepositioning


Products are commonly positioned on:Products are commonly positioned on:

Product attributesProduct attributes Benefits offeredBenefits offered Usage occasionsUsage occasions User groupsUser groups

Product attributesProduct attributes Benefits offeredBenefits offered Usage occasionsUsage occasions User groupsUser groups


Perceptual MappingPerceptual Mapping

Graphically Graphically displaying displaying consumers’ consumers’ perceptions of perceptions of product attributes product attributes across two or more across two or more dimensionsdimensions

Graphically Graphically displaying displaying consumers’ consumers’ perceptions of perceptions of product attributes product attributes across two or more across two or more dimensionsdimensions

Uses:Uses: to analyze current to analyze current

positionposition to select a position for to select a position for

a new producta new product to identify untapped to identify untapped

marketsmarkets

Uses:Uses: to analyze current to analyze current

positionposition to select a position for to select a position for

a new producta new product to identify untapped to identify untapped

marketsmarkets


Market Positioning Map: TeaMarket Positioning Map: Tea

IcedIced HotHot

Traditional flavorTraditional flavor

Unique flavorUnique flavor

Luzianne Luzianne

LiptonLipton

TetleyTetley

Celestial SeasonsCelestial Seasons

NesteaNestea

1980s1980s


Repositioning: TeaRepositioning: Tea

IcedIced HotHot

Traditional flavorTraditional flavor

Unique flavorUnique flavor

Luzianne Luzianne

LiptonLipton

TetleyTetley

Celestial SeasonsCelestial Seasons

NesteaNestea

mid-1990smid-1990s

Arizona Iced TeaArizona Iced Tea

SnappleSnapple

Lipton RoundsLipton Rounds

Tetley RoundsTetley Rounds

Lipton Natural TeasLipton Natural Teas

Lipton FlavoredLipton Flavored

Essentials of Marketing MKT 333

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