Chapter 08 MKT120 STP
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This document discusses market segmentation, targeting, and positioning. It begins by outlining the learning objectives which are to understand how firms decide on a segmentation strategy, determine the best segmentation method, evaluate segment attractiveness, and understand positioning. It then provides examples of different segmentation bases including demographic, geographic, psychographic, benefit, and loyalty segmentation. The document also outlines the steps to evaluate segment attractiveness and select a target market, and discusses developing a positioning strategy through identifying values, symbols, and competition. Key terms are defined in a glossary at the end.
Chapter 08 MKT120 STP
- 1. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
- 2. Learning Objectives LEARNING OBJECTIVES How does a firm decide what type of segmentation strategy to use? What is the best method of segmenting a market? How do firms determine whether a segment is attractive? What is positioning and how do firms do it? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-2
- 3. Coke Zero Why a new Diet Soda? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-3
- 4. Segmentation, Targeting, Positioning Process © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-4
- 5. Step 1: Establish Overall Strategy or Objectives Derived from mission Derived from mission Check Yourself Check Yourself and current state and current state © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-5
- 6. Segmentation Strategy © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-6
- 7. A firm’s segmentation strategy must be consistent with and derived from the firm’s _______________, as well as its current situation. A. perceptual map B. disclosure statement C. mission and objectives D. self-concept E. lifestyle © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-7
- 8. Step 2: Describe Segments © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-8
- 9. Geographic Segmentation © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-9
- 10. Demographic Segmentation U.S. Census Bureau Website © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-10
- 11. Demographic segmentation is the most common basis of consumer market segmentation, because these segments are: A. easy to define and usually easy to reach. B. psychographically distinct. C. self-value, self-contained segments. D. defined by the benefits consumers’ receive. E. all of the above. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-11
- 12. Balancing Act Career Moms © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-12
- 13. Psychographic Segmentation © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-13
- 14. VALS Framework VALS Website © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-14
- 15. Benefit Segmentation © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-15
- 16. Geodemographic Segmentation Claritas Website © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-16
- 17. State Farm Not Insuring Mississippi © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-17
- 18. Loyalty Segmentation Much cheaper to keep an Much cheaper to keep an Lifetime value Lifetime value existing customer existing customer © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-18
- 19. One of the reasons marketers utilize _______________ segmentation is the high cost of finding new customers. A. geographic B. benefit C. psychographic D. loyalty E. geodemographic © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-19
- 20. Step 3: Evaluate Segment Attractiveness © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-20
- 21. Identifiable • Who is in their market? • Are the segments unique? • Does each segment require a unique marketing mix? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-21
- 22. Substantial Too small and it is insignificant Too big and it might need it’s own store © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-22
- 23. Reachable © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-23
- 24. Responsive Customers must: © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-24
- 25. Profitable © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-25
- 26. Profitable Segments Segment size = 60 million (<15 yrs) Segmentation Adoption Percentage = 35% Purchase Behavior = $500 x 1 time purchase Profit margin % = 10% Is this segment profitable? Is this segment profitable? Fixed Cost = $50M © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-26
- 27. Step 4: Selecting a Target Market How does Hallmark select target markets? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-27
- 28. Segment Attractiveness © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-28
- 29. Step 5: Identify and Develop Positioning Strategy © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-29
- 30. Step 5: Identify and Develop Positioning Strategy © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-30
- 31. Value Meet Grandpa Tony, now retired: He knows the price of everything. He clips coupons. He goes to multiple stores to get the best price. He is willing to pay more for quality. He trusts brand names. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-31
- 32. Value Meet Celia, college freshman: Reasons for her college choice: Close to home. Good academic reputation. Good financial aid package. Did we mention cute guys? © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-32
- 33. Symbol © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-33
- 34. Competition © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-34
- 35. Positioning © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-35
- 36. When selecting a target market, a marketer should: A. determine a customer’s objective. B. describe past market segments. C. evaluate the attractiveness of each consumer. D. Match the firm’s competency with a market segment’s attractiveness. E. identify a positioning strategy. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-36
- 37. Positioning Steps © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-37
- 38. Perceptual Maps © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-38
- 39. Repositioning © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-39
- 40. Glossary Benefit segmentation groups consumers on the basis of the benefits they derive from products or services. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-40
- 41. Glossary Demographic segmentation groups consumers according to easily measured, objective characteristics such as age, gender, income, and education. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-41
- 42. Glossary Geodemographic segmentation uses a combination of geographic, demographic, and lifestyle characteristics to classify consumers. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-42
- 43. Glossary Geographic segmentation organizes customers into groups on the basis of where they live. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-43
- 44. Glossary Loyalty segmentation classifies customers by whether they buy almost exclusively from the firm. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-44
- 45. Check Yourself 1. Identify the steps in the segmentation process 2. What are the four segmentation strategies? 3. What are the various segmentation methods? 4. Identify four positioning strategies. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-45
- 46. Check Yourself 1. What is a perceptual map? 2. Identify the five positioning steps. © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-46
- 47. Glossary Psychographic segmentation, or psychographics, allows people to describe themselves using characteristics that help them choose how they occupy their time (behavior) and what underlying psychological reasons determine these choices. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-47
- 48. Glossary The Value and Lifestyle Survey (VALS) is a psychographic tool that classifies consumers into eight categories based on their answers to a questionnaire. Return to slide © McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 8-48
Editor's Notes
- #3: These are the learning objectives for this chapter.
- #4: Firms constantly look to increase the markets for their products by getting current consumers to consume more, obtaining new consumers for current products, offering new products to current consumers, or entering an entirely new market. To use these strategies, firms must understand customers in the various markets; Coca cola realized men did not want to buy a “diet” drink because it was too feminine yet wanted 0 calories.
- #5: Previous chapters addressed how to plan marketing strategy; this chapter focuses on how firms use that strategy to identify the target markets they will serve.
- #6: Remind students that any strategy must be consistent with the firm’s mission statement and be based on the current assessments from SWOT analyses
- #7: Ask students: What is an example of a mass market product? Answer: There are very few mass market products. Even commodity goods such as flour are now differentiated. Ask students : What are examples of products that use differentiated, concentrated, and micromarketing segmentation strategies? Differentiated = Coca Cola Concentrated = Helena Rubenstein or Clinique Microtargeting = Financial Services Providers
- #8: Ans. C Explanation: Marketers match their core competencies, as outlined in a firm’s mission and objectives, with market segments mostly likely to value what they have to offer.
- #9: Group activity: Divide the class into groups. Have them choose either a manufacturer or national retailer. Have them describe their segmentation strategy and then evaluate whether or not it is the best segmentation strategy for that firm.
- #10: Geographic information software (GIS) aids in such segmentation. Many firms use regional brands of popular products. When Dunkin’ Donuts introduced soup to its menu, it included New England Clam Chowder which appealed to northeastern consumers, but franchisees in Texas objected to this choice. Understanding regional preferences can define a company’s success — or failure. Ask students: How can firms successfully change a regional brand into a national brand? This will tie to the previous chapter on global marketing – should they adapt to local tastes?
- #11: This web link is to the U.S. Census Bureau. They provide one of the most important marketing research tools: Census data, which offer a rich, free source of information about various consumers that, suggests segmentation possibilities. On the Census Bureau Website, walk students through the information available about the zip code in which your university is located.
- #12: Ans. A Explanation: Demographic segmentation, divides the larger market into groups based on age, income, education, race, or gender. It is usually relatively easy to identify and reach demographic segments in the marketplace.
- #13: Ask students what types of products can be targeted to this growing segment which has demographic, psychographic and geographic variables.
- #14: Not just businesses segment their customers; segmentation also helps organizations that counsel drug addicts or other at-risk groups. Recall the discussion during the last presidential election about “hockey moms”—middle-class, educated, married women concerned about various threats to their children. Group Activity: Divide students into groups. Have each choose a product/service they like. Have them describe users of that product/service in terms of psychographics
- #15: Click on the VALS hyperlink and take the survey as a class. Group activity : Students complete the VALS survey individually, and then bring their completed survey to class. Ask students : Why might you fall into similar categories? Who fell into different categories? For example, few business students likely belong to the Believers category, but art majors very well may.
- #16: Group activity : Have students identify products that provide each type of benefit. How else might these products be segmented? This activity provides a good opportunity to remind students that products exist in multiple segments, just as consumers do. Different motives lead different consumers to purchase the same product.
- #17: Click on the Claritas link and conduct the “You Are Where You Live” exercise with the zip codes of the students’ hometowns. Ask students: Describe your neighborhood. How accurately does the site depict your hometown?
- #18: Ask students when geographic segmentation is not legal or ethical. You can play this video about State Farm refusing to insure Mississippi.
- #19: Firms encourage loyalty in various ways, such as airline mileage or hotel point reward programs. Ask students: Are you a loyal buyer of any single product, to the extent that you refuse to purchase a substitute? Students may refer to soft drinks, but true brand loyalty is extremely rare.
- #20: Ans. D Explanation: Research has shown that it is usually much more expensive to find new customers than to keep existing customers. Benefit segmentation focuses on the benefits or value different customer segments receive from a product or service.
- #21: Marketers first must determine whether the segment is worth pursuing, using several descriptive criteria: Is the segment identifiable, substantial, reachable, responsive, and profitable.
- #22: Ask students: When would these women all be in the same segment? When would they be in different segments? These women would appear in the same segment if the segmentation variable were gender but in individual segments based on race or lifestyle. They also may be in different geographic or income segments, for example.
- #23: Just because a firm can find a market does not necessarily mean it represents a good market. But size in terms of number of people is not the only consideration; despite its small size, the market for the original Hummer was incredibly profitable, and therefore was substantial
- #24: The Internet has enabled more people to be reached more easily, but various areas around the world simply cannot be served because they aren’t accessible to marketing messages or because there isn’t adequate distribution. Ask students: What types of media influence the way they shop? The answer may lead to an interesting discussion about how difficult it is to reach Generation Y customers either because they don’t participate in traditional media such as newspapers or because they are skeptical about being influenced by commercial messages.
- #25: Group activity : Nike is very successful at selling sports related goods. Would consumers accept personal care products from Nike? Why or why not? Develop a list of potential products for Nike. Ask students: Are any of the following acceptable: cologne, deodorant, toothpaste, or hair gel. Why or why not? What about Nike towels, sheets, or pajamas? What differences can you identify between these two types of product categories? Students are likely to say they will not understand the value proposition and the company’s expertise. Yet other students might say that they will believe in personal care product because Nike offers superior products.
- #26: A hot segment today may not last long enough to make it worth investment. Many firms are investigating when and how much to invest in the Millennial/GenY generational cohort. Firms in financial services and housing understand that it provides a new potential market, but the debt levels this segment carries makes it difficult to target effectively.
- #27: Children under 15 represent a very profitable market segment as this example illustrates.
- #28: Hallmark looks at geographic segmentation when building new stores. They also use benefit segmentation for their online cards. In general, a company matches their competencies with the attractiveness of target markets.
- #29: An illustration of how a firm like Hallmark might match its competencies with the attractiveness of various alternative segments and use this process to pick the best fit.
- #30: Ask students how this financial services company positions themselves? Charles Schwab is positioned as non-complicated and very friendly.
- #31: Positioning strategies generally focus on either how the product or service affects the consumer or how it is better than competitors’ products and services. When positioning against competitors, the objective is to play up how the brand being marketed provides the desired benefits better than do those of competitors. Firms thus position their products and services according to value, salient attributes, and symbols, and against competition.
- #32: S elling to Grandpa Tony and the millions of other value-conscious consumers is not easy. Firms like Wal-Mart use an everyday low price (EDLP) strategy to stress how a dollar can go further in their stores. Other firms position themselves as reasonably priced with outstanding quality and selection (e.g., Target).
- #33: Like Celia, many students develop a list of salient attributes when choosing a college. These lists often include price, but price might not be the most important attribute in the purchase decision. Group activity : Develop a list of the salient attributes you used to choose a college. How well did this university meet the criteria on your list? Compare lists to determine how your school positioned itself to appeal to the various attributes you desired.
- #34: Ask students : What commercial symbols are salient to you? Do you feel positively or negatively toward these firms based on their commercial symbol
- #35: Firms that lack market leadership often position themselves in contrast with the leader to demonstrate that they offer the same (or better) service and quality. Motel 6 used quirky commercials to poke fun at its low budget approach but still point out that it offered the same services as more expensive hotels.
- #36: Ask students – how is this positioning? They should say salient attributes and competition. Interesting here that the competition is it’s own product – that is the joke of the ads.
- #37: Ans. D Explanation: No marketer has sufficient resources to create value for all consumers. The essence of target marketing is matching the firm’s competency with a market segment’s attractiveness.
- #38: This slide provides the steps necessary to develop the positioning map on the next slide. Switch back and forth on these two slides to explain the positioning map.
- #39: This perceptual map was created by the process on the previous page. It was for Gatorade which was seeking a positioning of healthy and sweet taste.
- #40: Baking soda is an excellent example of a product that has experienced many repositioning in the marketplace. The periodic introduction of new uses causes consumers to redefine why they might need baking soda.
- #46: Step 1: Establish Overall Strategy or Objectives, Step 2: Describe Segments, Step 3: Evaluate Segment Attractiveness, Step 4: Select Target Market, Step 5: Identify and Develop Positioning Strategy Undifferentiated Segmentation Strategy, or Mass Marketing, Differentiated Segmentation Strategy, Concentrated Segmentation Strategy, Micromarketing geographic, demographic, psychographic, benefit, geodemographic, loyalty, and composite segmentation approaches. Value, Salient Attributes, Symbol, Competition
- #47: A perceptual map displays, in two or more dimensions, the position of products or brands in the consumer’s mind. Determine consumers’ perceptions and evaluations of the product or service in relation to competitors’, identify competitors’ positions, determine consumer preferences, select the position, monitor the positioning strategy.