Marketing Chapter 8 Segmentation Targeting and Positioning Dhruv

Marketing Chapter 8 Segmentation, Targeting, and Positioning Dhruv Grewal Michael Levy Mc. Graw-Hill/Irwin Copyright © 2008 by the Mc. Graw-Hill Companies, Inc. All rights reserved.

8 -2 Garnier Fructis l l l Appeals to natural/organic segment Top 10 best selling shampoos Market leader in conditioner © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -3 Segmentation Targeting Positioning Process © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -4 Step 1: Establish Overall Strategy or Objectives Consistent with mission statement Derived from mission and current state © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -5 Segmentation Strategy © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -6 Test Your Knowledge Which of the following products is most likely to use an undifferentiated segmentation strategy? A) shoes B) jewelry C) cereal D) flour

8 -7 Dealing with Fragmentation How are firms dealing with the fragmentation of the media market?

8 -8 Case in Point: Mc. Donald’s Challenge Answer Results How to reach consumers in light of the diminishing mass audience. Shift funding from television advertising from 2/3 to 1/3 of the budget. Buy alternative media targeted to specific audiences. New mix includes: Ads on Foot Locker’s in store video to reach young men, ads in O Magazine and Marie Claire to target women, closed circuit sports programs to the Hispanic market. According to Mc. Donald’s CMO “We are a big marketer not a mass marketer. ”

8 -9 Segmentation Strategy (continued) l l l Differentiated segmentation strategy Concentrated segmentation strategy Micromarketing What are examples of products that use differentiated, concentrated, and micromarketing segmentation strategies? © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -10 Step 2: Describe Segments © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -11 Geographic Segmentation Country Region State City Neighborhood © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -12 Test Your Knowledge Geographic segmentation is most useful for companies whose products satisfy needs that vary by _____. A) gender B) region C) age D) nationality

8 -13 Geographic Expansion How can firms successfully change a regional brand into a national brand?

8 -14 Case in Point: Federated Department Stores Big Risk Challenge How to integrate well established and beloved local retail brands into one national brand, Macy’s, without alienating the current customers? Answer Figure out what aspect of the current brands are important to customers and keep those while stressing the value created by the 800 stores Macy’s stores throughout the U. S. Results In Chicago, keep Fields Frango mints, in Boston keeping Filene’s annual tree lighting ceremony. Also by keeping popular store brands while up scaling other brands.

8 -15 Demographic Segmentation l l l Most common segmentation strategy U. S. Census excellent source of segmentation data www. census. gov © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -16 Psychographic Segmentation l Psychographic l Self-values l Self-concept l Lifestyles © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -17 Adding Value 8. 1: Segmenting the Asthma Patient Market by Lifestyle © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -18 VALS Framework © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -19 Benefit Segmentation l l Health Hedonic Educational Individuality or self-expression © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -20 Geodemographic Segmentation Claritas “You Are Where You Live”

8 -21 Test Your Knowledge Which of the following tools is widely used for geodemographic segmentation? A) PRIZM B) LSAT C) GNP D) LIMRA

8 -22 Finding Where to Live How can geodemographic segmentation be used to help consumers find the perfect place to live?

8 -23 Case in Point: Neighborhood Scout Challenge Answer Results To help homebuyers find the perfect neighborhood for their needs. Use geodemographic segmentation to identify the neighborhoods that most closely match their needs and wants. A patented neighborhood search engine with 70, 000 subscribers and more than 1 million people who have used the service.

8 -24 Loyalty Segmentation Much cheaper to keep an existing customer © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin Lifetime value

8 -25 Using Multiple Segmentation Methods © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -26 Step 3: Evaluate Segment Attractiveness © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -27 Identifiable l l l Who is in their market? Are the segments unique? Does each segment require a unique marketing mix? Discussion question When would these women all be in the same segment? When would they be in different segments? © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -28 Substantial l Size matters l Too small and it is insignificant l Not profitable © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -29 Reachable Persuasive communication © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin Distribution

8 -30 Responsive Customers must: l l l React positively to firm’s offering Move toward the firms products/services Accept the firm’s value proposition Discussion question Nike is very successful at selling sports related goods. Would consumers accept personal care products from Nike? Why or why not? © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -31 Profitable Segment profitability = Segment size x Segment adoption percentage x Purchase behavior x Profit margin percentage – Fixed costs, where Segment size = Number of people in the segment Segment adoption percentage = Percentage of customers in the segment who are likely to adopt the product Purchase behavior = Purchase price x number of times the customer would buy the product/service during a given time period. Profit margin percentage = ((Selling price – variable costs) ÷ selling price). Fixed costs = Fixed costs (e. g. , advertising expenditure). © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -32 Profitable Segments l l l Segment size = 60 million (<15 yrs) Segmentation Adoption Percentage = 35% Purchase Behavior = $500 x 1 time purchase Profit margin % = 10% Fixed Cost = $50 M Is this segment profitable?

8 -33 Test Your Knowledge Which of the following factors would be most useful in determining whether or not a product will be profitable? A) the region where the consumer lives B) the inflation rate C) the defection rate D) the speed of the distribution factors

8 -34 Step 4: Selecting a Target Market l l l Meet Connie, marketing manager for a denim company Has to choose a new target market for the firms new line of jeans. Both the consumers pictured wear jeans. How does she choose? © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -35 Step 5: Identify and Develop Positioning Strategy © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -36 Test Your Knowledge Positioning strategies generally focus on either how the product or service affects the consumer or how it is ________. A) better than the previous year’s product line B) advertised on the Internet C) better than competitors’ products and services D) positioned relative to the company mission statement

8 -37 Value Consider Grandpa Tony, now retired: l He knows the price of everything he has ever bought. l He clips the newspaper coupons. l He goes to multiple stores to get the best price. l He is willing to pay more for quality. l He trusts brand names. Discussion question How can marketers appeal to price sensitive customers like Grandpa Tony? l l The relationship of price to quality Different consumers = different value © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -38 Salient Attributes Consider Selia, college Freshman. Reasons for her college choice: l Close to home. l Good academic reputation. l Good financial aid package. l Did we mention cute guys? Discussion question l What were the salient attributes of your college choice? l Focus on the attributes that are most important Vary by target market © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -39 Symbol Can be used as a positioning tool © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -40 Competition Position against a specific competitor Position against an entire product classification © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -41 Entrepreneurial Marketing 8. 1: Tom and Tom The Juice Guys l l l Desire to re-create a fruit beverage from Spain Use only top quality ingredients Positioned as a quality, natural juice beverage Eventually expanded to teas, etc. Annual net sales in 2002 $59 million © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -42 Positioning Strategies 1. Determine consumers’ perceptions and evaluations of the product or service in relation to competitors’. 2. Identify competitors’ positions. 3. Determine consumer preferences. 4. Select the position. 5. Monitor the positioning strategy. © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -43 Perceptual Maps © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -44 Repositioning Volcano Maker Cleaner Disposal Freshener Baking Ingredient Tooth Cleaner Stain Remover Refrigerator Freshener © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

8 -45 Chapter 8 Glossary l l l l Concentrated segmentation strategy: When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market’s needs. Differentiated segmentation strategy: When firms target several market segments with a different offering for each. Lifestyles: How we live our lives to achieve goals. Micromarketing: When a firm tailors a product or service to suit an individual customer’s wants or needs. Psychographic segmentation: Segmenting method that delves into how consumers describe themselves. Self-concept: The image people have of themselves. Self-values: Goals for life, not just the goals one wants to accomplish in a day. In this context, they refer to overriding desires that drive how a person lives his or her life. Undifferentiated segmentation strategy (mass marketing): Single strategy for everyone because everyone is considered a potential user of the product or service, being provided the same benefits. © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin