SEGMENTATION, TARGETING, AND POSITIONING

1. SEGMENTATION, TARGETING, AND POSITIONING • Segmentation • Product positioning • strategy • Bases for segmentation • Positioning • Targeting • Repositioning

2. SEGMENTATION, TARGETING, AND POSITIONING SEGMENTATION IDENTIFYING MEANINGFULLY DIFFERENT GROUPS OF CUSTOMERS TARGETING SELECTING WHICH SEGMENT(S) TO SERVE PROUDCT PRICE POSITIONING IMPLEMENTING CHOSEN IMAGE AND APPEAL TO CHOSEN SEGMENT PROMOTION DISTRIBUTION

3. Learning Objectives • Appreciate different unique needs and expectations of different customer groups • Appreciate tradeoffs among strategies of serving different segments • Understand methods for selecting and targeting customer groups • Understand bases for implementing target selection through positioning

4. Definitions Segmentation: “Aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.” “The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.” (Text, p. 97) Although not all these consumers are completely alike, they share relatively similar needs and wants. Marketing action involves: efforts, resources, and decisions--product, distribution, promotion, and price.

5. Approaches to Marketing • Undifferentiated Strategy (no intended difference from competitors; no specific consumer group sought out) • Concentrated Strategy (differentiation; one consumer segment sought) • Differentiated Strategy (same firm makes different versions for different segments) Southwest Airlines Some auto makers

6. Segments--Examples (1) • Air Travel • Business/Executive: Inflexible; relatively price insensitive (Small number of people, but travel often) • Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment) • Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)

7. Examples (2): Restaurant Diners E.g., --speed --location High • Convenience Low Low High-end delivered food Fancy Restaurants --e.g., Ritz Carlton Price Sensitivity Denny’s McDonald’s Local, “unbranded” fast food restaurants Taco Bell High

8. Combining variables… • Soft drink preferences—some segmentation variables • Preferred taste: Cola, lime, no taste, natural juice, ice tea • Calorie/taste tradeoff: taste more important, some importance of both, will sacrifice taste for low calories • Usage occasion: Multi-pack for home; single can/bottle; fountain drink • Price sensitivity/brand loyalty: Willingness to pay more for name brand or specialty soda

9. Some combined segments… • Price sensitive, non-brand loyal cola-taste, full-flavor segment, multi-pack • Price insensitive, cola taste, brand loyal, low calorie, multi-pack • Price insensitive, natural juice, taste sensitive, single serving Typical behaviors of these consumers. Circumstances may involve occasional variations.

10. Bases for Segmentation • Geographic • Demographic • Psychographic • Benefit Desired • Usage Rate • Other Behavior

11. Geographic • Regional differences • Climate and physical environment • Tastes • Campbell’s Soup • Lifestyle and values • Urban vs. rural areas

12. Demographics • Age • Gender • Willingness to spend • More useful than income—income ≠ willingness to spend! • “Trading Up:” Consumers may “splurge” in certain, personally significant categories while buying more downscale in other categories • Ethnicity • Family lifecycle stage

13. Psychographics • Personality • Very difficult to measure • Limited empirical support • Motives • Lifestyle • Usually more practical than personality

14. Usage Rate • “80/20” rule—20% of consumers may account for 80% of consumption (in many product categories) • Note that larger consumption rate segments may be subject to heavy competition • Reasons for targeting smaller segments • Reduced competition • Opportunity for growth

15. Other Behavioral Bases for Segmentation • Involvement • Interest • Knowledge • Willingness to spend time on making product category decisions • “Dealproneness” • Coupon usage • Brand switching in response to price incentives • Outlet (store) choice • Specialty • Convenience store • “Category killer” (e.g., Fry’s, Best Buy, Circuit City) • Discount • Warehouse

16. Benefits Sought • Based on • Differences in arbitrary tastes (e.g., cola vs. non-cola drink) • Ideal point • Tradeoffs(e.g., taste vs. calories) • Usage situation (e.g., coffee for camping (instant) vs. higher quality for home brewing)

17. Targeting: Selecting Segment(s) and Specializing • “You can’t be all things to all people” ---> choose one or more groups. • Focus narrows scope of competition, but demands are greater.

18. IDENTIFYING TARGETS • Customer information “enhancement”—information from different sources integrated (e.g., real estate records, purchase lists, magazine subscription, credit records) • “Merge-purge” • Customer lists from different sources are combined with removal of duplicates

19. LISTS OF BUYERS FROM ONLINE/CATALOG MERCAHNTS MERGE PROCESS MAGAZINE SUBSCRIPTIONS NAMES AND ADDRESSES FROM ALL SOURCES USED SURFER DUDE SURFER’S SUPPLY SURFER CHICK SURF CITY EXTREME SURFING REMOVE DUPLICATES SURFGEAR CALIFORNIA SURFER GENERAL LISTS (E.G., PHONE BOOK LISTINGS) ORGANIZATION MEMBERSHIPS NON-REDUNDANT FINAL LIST SORORITY SURFERS OF AMERICA SELECT RESIDENCES W/IN 2 BLOCKS OF BEACH CALIFORNIA SURFERS’ ASSOC. PURGE PROCESS GEORGIA SURFER SOCIETY

20. SEGMENTATION, TARGETING, AND POSITIONING PROUDCT PRICE PREMIUM PREMIUM POSITIONING IMPLEMENTING CHOSEN IMAGE AND APPEAL TO CHOSEN SEGMENT LOW PRICE BASIC VALUE DURABLE DISTRIBUTION PROMOTION INTENSIVE PRESTIGE SELECTIVE FUN EXCLUSIVE POWERFUL

21. “STUCK IN THE MIDDLE” PROBLEM • Brands that offer a clear benefit tend to do better • Clear orientation • Wal-Mart • Nordstrom’s • KFC • “Stuck in the middle” • Sears—Competition both from “above” and “below.” • Nevertheless, there are successful “middlelers:” Denny’s, Vons, Ralph’s

22. Positioning Strategies • “Head-on” competition • Airlines (want to differentiate but have difficulty pulling it off in practice) • Beef products • Differentiation • Burger King: Grilled instead of McDonald’s fried burgers • Hallmark: “When you care to send the very best…” • Hertz (vs. “Not exactly”) • Zachy Farms (chicken)

23. Repositioning • Repositioning: Changing established position may be difficult -- e.g., • Sears • McDonald Good sales; poor everyday values Lunch; not dinner Good for children

24. Multidimensional Scaling • Consumer product perception is identified along two or more “dimensions” • Methods: • A priori specification of dimensions  respondents make judgments • Respondent rating of relative similarity of brands/product categories  statistical model identifies unnamed dimensions  dimensions are inferred from characteristics of items at different points

26. HIGH Hershey’s Toblerone Dove Milk Chocolate Ritter Mr. Goodbar M&M HIGH LOW Snickers Almond Joy Kitkat Mars Reese’s York Smores Heath Butterfinger Twix LOW Milky Way

27. Similarity Ratings 1=“Not at all similar” 7=“Extremely Similar” Logically, all candy bars are “extremely similar” to themselves. The shaded regions are redundant—only the order is varied.

28. Some Repositioning Campaigns • Geritol: “Not too young for Geritol.” • Orange juice: “It isn’t just for breakfast anymore.” • Microsoft  “hipper” NOTE: Repositioning is difficult. It will take a great deal of advertising support. There is no guarantee that consumers will cooperate!

29. Some Brands That Were Dropped Rather Than Repositioned • ValueJet  AirTran • Packard Bell  e-Machines • German Communist Party  Party for Democratic Socialism

30. Euphemisms in Positioning • “Loss Prevention Associate” • “Sales Counselor” • “Pre-Owned” or “Previously Loved” Vehicle • “Gaming”