Essentials of Marketing MKT 333

1. Essentials of MarketingMKT 333 Chapter 3: Market Segmentation, Targeting, and Positioning Strategies

2. What is a Market? A group of actual or potential customers for a particular product. A market has: • Purchasing power • Willingness to spend money • Authority to spend money

3. Competitive Advantage Superiority to or favorable difference from competitors along some dimension important to the market. Two Approaches: • Price leadership strategy • Differentiation strategy

4. Price Leadership Strategy Emphasizes underpricing all competitors A price leader: • Has the lowest per unit costs • Generates large volume sales • Examples: Wal-Mart, Southwest Airlines, Bic pens

5. Differentiation Strategy Product is unique and offers distinct advantage or is set apart in ways other than price. • Examples: Scotch-Brite steel wool pads, Apple Computer

6. Market/Product Matrix Old/Existing Markets Old/Existing Products MARKET PENETRATION

7. Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products MARKET PENETRATION MARKET DEVELOPMENT

8. Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products MARKET PENETRATION MARKET DEVELOPMENT New Products PRODUCT DEVELOPMENT

9. Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products MARKET PENETRATION MARKET DEVELOPMENT New Products PRODUCT DEVELOPMENT DIVERSIFI- CATION

10. Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products MARKET PENETRATION MARKET DEVELOPMENT New Products PRODUCT DEVELOPMENT DIVERSIFI- CATION

11. What is Market Segmentation? Dividing a heterogeneous market into a number of smaller, homogeneous submarkets. Mass Market Market Segmentation

12. The Goal of Segmentation • To identify groups of people who will respond similarly to a marketing strategy

13. Commonly Used Bases for Segmentation • Demographic information • socio-economic factors • geographic/geodemographic information • consumer behavior patterns • consumption patterns • benefits desired • Psychographics

14. Segmenting Consumer Markets: Demographic Demographic Segmentation: • Age • Sex • Race and ethnicity • Family life cycle • Marital status • Family size

15. Insurance: You would feel more comfortable knowing you will have the security of an income within 30 days of your injury, don’t you think? Cars: You have the safety of knowing that this car was rated as one of the most reliable performers. Computers: I recommend a faster machine so you don’t have to wait a long rime for the information to appear on the screen and enough capacity for your graphic displays. Insurance: For only $36 dollars a month, a fraction more than a dollar a day, you can be guaranteed an income for the rest of your life if you become injured. Cars: The sleek aerodynamic design make this car an outstanding performer. Computers: In order to get real performance, you’ll want at least a Pentium 150 with 16 megs of RAM and a 1.6 gig hard drive. Men and Women Differ in their Responses to Marketing Communication

16. Financial Services: Let’s work together to develop a plan that will make you feel comfortable if you decide to retire at age 65 Newsletters: This newsletter will facilitate a better understanding and communication between you and your staff. Financial Services: You will need to set aside X amount of money a year in order to retire to a comfortable lifestyle. Newsletter: The information in this newsletter will make you an expert in your field, so you can more easily direct your staff. Men and Women Differ (cont.)

17. Segmenting Consumer Markets: Socioeconomic • Socioeconomic Segmentation: • Occupation • Education • Income • Social class

18. Segmenting Consumer Markets: Geographic Geographic Segmentation: • Continent • Political boundaries • Cultural regions • Metropolitan areas • Climatic regions

19. Segmenting Consumer Markets: Geodemographic • Geodemographic Segmentation: • Combination of geographic and demographic variables • Example: zip codes in PRIZM system Beverly Hills 90210

20. Segmenting Consumer Markets: Behavior Patterns • Segmenting by Behavior Patterns: • Heavy users vs. infrequent users • Purchasing habits • Loyalty to brand • Benefit expected • Importance of price

21. Segmenting Consumer Markets: Psychographic/Lifestyle • Psychographic/lifestyle Segmentation: • Activities • Interests • Opinions • Values

22. Segmenting Business Markets Segmentation variables: • Geographic • Organizational characteristics • Purchase behavior and usage patterns • Organizational predisposition or policy

23. Steps in Segmenting and Selecting Target Markets Step 1: Break market into component parts Step 2: Regroup into market segments Step 3: Select which segment(s) to target Heterogeneous customers Homogeneous market segments Target market Individual customers

24. Target Market The market segment toward which the organization decides to direct its marketing plan. Target Market

25. Strategies for Target Marketing Four Strategies: Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Custom Marketing

26. Undifferentiated Marketing Appeal to a broad range of customers. Target market Marketing organization Marketing mix A small store in an isolated town • Product • Price • Distribution • Promotion Everybody

27. Concentrated Marketing Zeroing in on a single target market. Suburban users Marketing organization Marketing mix Large chain saw manufacturer • Product • Price • Distribution • Promotion Farm users Lumber- jacks

28. Differentiated Strategy Select more than one target market and develop a separate marketing mix for each.

29. Differentiated Strategy: Example of Clairol Marketing Organization Several marketing mixes Target market segment Clairol Clairol Option for Men Men with gray hair Clairol Loving Care Middle aged women Clairol Ultress Prestige-oriented women Miss Clairol Brand loyal users Clairol Frost & Tip Young women

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

31. Custom Strategy Individual marketing mix for each customer Marketing Organization Individual customers Industrial robots mainte- nance Marketing mix #1 Customer #1 Marketing mix #2 Customer #2 Customer #3 Marketing mix #3 Marketing mix #4 Customer #4

32. Positioning • What do we want our customers to think about our products? • How should it compare to our competitor’s products?

33. Positioning Market position: The way consumers perceive the brand relative to its competition. • Head-to-head competition • Repositioning

34. Products are commonly positioned on: • Product attributes • Benefits offered • Usage occasions • User groups

35. Graphically displaying consumers’ perceptions of product attributes across two or more dimensions Uses: to analyze current position to select a position for a new product to identify untapped markets Perceptual Mapping

36. Market Positioning Map: Tea 1980s Traditional flavor • Tetley • Lipton • Luzianne Iced Hot • Nestea • Celestial Seasons Unique flavor

37. Repositioning: Tea mid-1990s Traditional flavor • Tetley Rounds • Tetley • Lipton Rounds • Lipton • Luzianne Iced Hot • Arizona Iced Tea • Lipton Natural Teas • Nestea • Celestial Seasons • Snapple • Lipton Flavored Unique flavor