Chapter 3

1. Chapter 3 Segmentation, Targeting, and Positioning Segmentation, Targeting, and Positioning

2. Mass-marketing • A strategy that presumes there is one undifferentiated market and that one product will appeal to all consumers in that market.

3. Advantages • Lower cost • One advertising campaign is needed • One marketing strategy is developed • Usually only one standardized product is developed

4. Disadvantage • It only works if all consumers have the same needs, wants, desires, and the same background, education and experience

5. Market matching strategy • Today, mass marketing has largely been replaced by a three-step market matching strategy

6. Segmentation Targeting Positioning Market Matching Strategy Market Matching

7. Market Matching Strategy • Segmentation • Act of dissecting the marketplace into submarkets that require different marketing mixes • Targeting • Process of reviewing market segments and deciding which one(s) to pursue • Positioning • Establishing a differentiating image for a product or service in relation to its competition

8. Market segmentation • The process of dividing a market into distinct subsets (segments) of consumers with common needs or characteristics and selecting one or more to target with a distinct marketing mix

9. Geographic Geodemographic Behavioral Demographic Psychographic Segmentation Variables Segmentation Variables

10. Marketers may use a single variable • Marketers may use two or more variables

11. Geographic Segmentation • Division of the market based on the location of the target market • People living in the same area have similar needs and wants that differ from those living in other areas • Climate • Population density • Taste • Micromarketing

12. Demographic Segmentation • Partitioning of the market based on factors such as • age • gender • marital status • income • occupation • education • ethnicity

13. Age • Product needs and interests often vary with consumers’ age

14. Age Effects • Occurrences due to chronological age

15. Cohort Effects • Based on the idea that people hold onto the interests they learned to appreciate growing up

16. Gender • Gender is frequently a distinguishing variable • Changes in the family and growth of the dual-income household have blurred some of the lines

17. Marital Status • Marketers have identified specific marital status groups, such as: • Singles • Divorced individuals • Single parents • Dual-income married couples • They then market products specifically designed for one or more groups

18. Income, Education & Occupation • These three variables are often related and therefore often used together as a measure of one’s social class. • Income is commonly used because marketers feel it is a strong indicator of ability to pay for a particular product or service • Income is often combined with other variables to narrow target markets: • With age to identify the important affluent elderly • With age and occupation to produce the yuppie segment

19. Race and Ethnicity • The size and purchasing power of minorities make them an attractive target market • The size of the market is growing dramatically relative to the “majority” population • Targeting certain products (e.g., alcohol, tobacco) to such groups raises ethical issues

20. Tobacco and the African American Community • Why is there a concern about targeting African Americans? • During the ’90s, youth smoking rates increased sharply • 12.6% in 1991 • 22.7% in 1997 • 80% increase

21. After Native Americans, African Americans have the highest rate of smokers of any ethnic group in the US • African American men have the highest rate of death from lung cancer of any ethnic group in the US • 81% of African American men who smoke and contract lung cancer die • 51% of white men who smoke and contract lung cancer die

22. Tobacco companies have clearly targeted African Americans • Brown & Williamson’s Kool brand • used a cartoon character, the penguin Willie, that was popular with black teens • Has sponsored an annual jazz festival that attracts large black audiences • In 1998 cigarette advertisements represented 60% of ad space in black newspapers • Following the success of the movie “Malcolm X”, Star Tobacco Co. introduced a new brand called “X,” packaged in the black, red and green colors of the black nationalist movement • Marketed in 20 states before pressure from the community forced discontinuance of the brand

23. Geodemographic Segmentation • A hybrid segmentation scheme • Based on notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits

24. Market research firms specialize in producing computer-generated geodemographic market “clusters” of consumers • They have clustered the nation’s >250,000 neighborhoods into lifestyle groupings based on postal zip codes • Marketers use the cluster data for mail campaigns, to select retail sites and merchandise mixes, to locate banks and restaurants, etc. • “You Are Where You Live”.

25. Psychographic Segmentation • Partitioning of the market based on lifestyle and personality characteristics • Marketers use it to further refine a target market • Its appeal lies in the vivid and practical profiles of consumer segments that it can produce • Accomplished by using AIO inventories

26. AIO Inventories • AIO research seeks consumers’ responses to a large number of statements that measure • Activities • Interests • Opinions

27. Examples of the use of psychographic segmentation reflected in marketing messages • Kellogg’s targets health-conscious consumers with brands such as Special K and Product 19 • Old Spice is targeting the active sports lifestyle with High Endurance deodorant

28. Behavioral Segmentation • Partitioning of the market based on attitudes toward or reactions to a product and to its promotional appeals

29. Behavioral segmentation can be done on the basis of: • Usage rate • Benefits sought from a product • Loyalty to a brand or a store

30. 1. Usage Rate • Differentiates between • heavy users • medium users • light users • nonusers • In general, a relatively small number of heavy users account for a disproportionately large percentage of product usage • Targeting those heavy users is a common marketing strategy

31. 2. Benefit Segmentation • Marketers constantly attempt to identify the single most important benefit of their product that will be the most meaningful to consumers • Changing lifestyles play a major role in determining the product benefits that are important to consumers and also provide marketers with opportunities for new products and services

32. 3. Brand and Store Loyalty • The tendency of some consumers to repeatedly select the same brand within a given product category • A parallel tendency of some consumers to repeatedly patronize a particular retail establishment

33. Marketers often try to identify the characteristics of their brand-loyal customers so they can target consumers with similar characteristics in the larger population • Marketers also target consumers who show no brand loyalty as a means of penetrating a larger market • Marketers reward brand loyalty by offering special benefits to frequent customers

34. Choosing Market Segments to Target • Once an organization has identified its most promising market segments, it must decide whether to target one segment or several segments • Each targeted segment will then receive a specially designed marketing mix — i.e., a specially tailored product, price, distribution network and/or promotional campaign

35. Market Targeting Strategies There are three basic types of strategies: • Undifferentiated • Multisegment (Differentiated) • Concentration (Niche)

36. 1. Undifferentiated Strategy • A strategy that ignores differences between groups within a market and offers a single marketing mix to the entire market • It works when a product is new to the market and there is minimal or no competition

37. Advantages and Disadvantages • Economies in production and marketing • Vulnerability to competitors offering more differentiated products and services to market subsegments

38. 2. Multisegment/Differentiated Strategy • Targeting two or more segments with different marketing mixes for each

39. Advantages and disadvantages • Minimizes risks, as losses in one segment can be made up for in others • Unique product features allow for higher prices • Increased costs for differentiated products and marketing

40. 3. Concentration/Niche Marketing Strategy • Focus on one sub-market

41. Greater knowledge of customers’ needs • Economies of scale • Entry of a strong competitor • Change in size or tastes of the segment

42. Positioning • Deciding how the firm wants the company and its brands to be perceived and evaluated by target markets • Differentiating the product from other products of the firm or its competition

43. Positioning complements and is an integral part of the company’s segmentation strategy and selection of target markets • The same product can be positioned differently to different market segments • The result of successful positioning is a distinctive brand image on which consumers rely in making product choices

44. Perceptual Mapping • A spatial picture of how consumers view products or brands within a market • Allows marketers to determine how their product appears in relation to competitive brands • Enables them to see gaps in in positioning of all brands in the product class to identify areas in which consumer needs are not being met

45. More • Tylenol • Extra-Strength Tylenol • Bufferin • Nuprin • Motrin • Advil • Anacin • Bayer • Excedrin • Private Label Aspirin • Aleve Actron • Orudis Less More A visual profile of how consumers perceive a number of pain relievers on the two dimensions of effectiveness vs. gentleness. Effectiveness Gentleness to Stomach

46. Repositioning • Marketers may be forced to reposition products due to competition or a changing environment

47. Modifying an existing brand • Targeting it to a new market segment • Emphasizing new product uses and benefits • Stressing different features with the intention of boosting sales

48. Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997. DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent SEX (BASE 990) Men 86 Women 13 USE A COMPUTER 100 At home 96 At work 89 On vacation/traveling 46 AGE Under 25 5 25 - 34 18 35 - 44 29 45 - 54 31 55 - 64 12 65 or older 5 Mean age 44.1 SELECTED USE OF COMPUTER Word Processing 96 Connect to Internet 86 E-mail 84 For work 80 Accounting/record keeping 75 Reference 68 Recreation/games 66

49. DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent EDUCATION Some college or less 27 Graduate college 27 Education beyond college graduate 46 PORTABLE DEVICES USED WHEN TRAVELING ON BUSINESS Laptop/notebook computer 57 Cellular phone 47 Beeper or pager 30 Personal Digital Assistant/ electronic organizer 14 EMPLOYMENT STATUS Employed by someone else 68 Self-employed 21 Other 11

50. DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent OCCUPATION/BUSINESS DEPT. Computer related- professional 22 Senior or corporate management 16 Engineering-related professional 13 Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales 26 Others 23 TRAVEL FOR BUSINESS/PLEASURE Business Travel 5 or more days per month 31 5 or more nights away from home per month 17 Pleasure/Vacation Travel 15 or more days per year 37 Mean number of days per year 15.5 MEMBER OF FREQUENT FLYER PROGRAMS 90