CHAPTER THREE

Focusing Marketing Strategy with Segmentation and Positioning

* I have swopped chapter 3 (Evaluating Opportunities) and chapter 4 (Segmentation & Positioning) in your text

When we finish this lecture you should

1.
2.

3.
4.

5.
6.

Know about defining generic markets and product-markets. Know what market segmentation is and how to segment product-markets into submarkets. Know three approaches to market-oriented strategy planning. Know dimensions that may be useful for segmenting markets. Know a seven-step approach to market segmentation that you can do yourself. Know what positioning is and why it is useful.

Focusing Marketing Strategy with Segmentation and Positioning (Exhibit 3-1)

Marketers approach to selecting their target customers Define Segmentation & Targeting

Define Differentiation & Positioning

Focusing Marketing Strategy with Segmentation and Positioning (Exhibit 3-1)

Segmentation
Defining markets Dimensions to use Identifying segments Identifying segments to target Segmentation approaches

Ferrari ad

Positioning
Understanding customers view Positioning techniques Evaluating segment preferences Differentiating the marketing mix Relationship between positioning & targeting e.g. Compare Lexus, Volvo and Ferrari cars

e.g. Coach handbags

Segmenting is an aggregating process-clustering people with similar needs into individual market segments.

Taking Advantage of Opportunities

Naming Product Markets and Generic Markets

Managers need to think about more than the product they already produce and sell. This can be done by naming product markets and generic markets with a four-part description.

Product Type

Customer Needs Product-Market Definition

Geographic Area

Customer Type

No Product Type in Generic Market Definition

Segmentation is a Two-Step Process

Class Exercise: segmenting based on made of car

1. Naming broad product-markets

and 2. Segmenting markets and selecting targets

Market segment: a relatively homogeneous group of consumers who will respond to a marketing mix in a similar way.

Search for Opportunities Can Begin by Understanding Markets (Exhibit 3-3)

e.g. market segmentation of a bike manufacturer Selecting target marketing approach
Single target market approach Multiple target market approach

Narrowing down to specific product-market

Segmenting into possible target markets

Homogeneous (narrow) productmarkets

All customer needs

Some generic market

One broad productmarket

Cars Needs for Bicycles transportation Trucks Motorcycles Bicycles

(See next slide)

Combined target market approach

Market Segmentation Defines Possible Target Markets (Exhibit 3-4)

Broad product-market (or generic market) name goes here (The bicycle-riders product-market)
Submarket 1 (Exercisers) Submarket 2 (Off-road adventurers) Submarket 3 (Transportation riders) Submarket 4 (Socializers)

Submarket 5 (Environmentalists)

How Far Should the Aggregating Go? (Exhibit 3-5A and 3-5B)
Homogeneous within- customers in a market segment should be as similar as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions. Heterogeneous between- customers in different segments should be as different as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions.

A. B. Product-market showing three segments six segments Status dimension

Dependability dimension

Target Marketers Aim at Specific Targets (Exhibit 3-6)

In a product-market area A segmenter

Using single target market approach can aim at one submarket with one marketing mix Using multiple target market approach can aim at two or more submarkets with different marketing mixes

A combiner
Using combined target market approach can aim at two or more submarkets with the same marketing mix

Segmenting vs. Combining

many factors that affect the choice between being a segmenter and a combiner.

Profit Is the Balancing Point

Combiners Try to Satisfy Pretty Well

Too Much Combining Is Risky

Key Issues
Segment or Combine? Segmenting May Produce Bigger Sales Segmenters Try to Satisfy Very Well

Behavioral dimensions for segmenting consumer markets

Cars with great gas mileage

Information required Type of problemsolving Kind of shopping Brand Brand familiarity familiarity

Needs

Benefits sought

Behavioral Segmenting Dimensions

Thoughts

Rate of use

Purchase relationship

Geographic dimensions for segmenting consumer markets Region of world or country Region in a country

Geographic Segmentation Dimensions

Size of city

Demographic dimensions for segmenting consumer markets

Income

Sex or age Demographic Segmentation Dimensions Family size or family life cycle stage Occupation or education Ethnicity or social class

Segmenting business markets

Kind of relationship

Type of customer

Purchasing methods

Segmenting Dimensions for Business Markets

Demographics

Type of buying situation

How customers will use the product

Business-to-Business Segmentation

What Dimensions Are Used to Segment Markets?

Must meet qualifying basic needs What triggers customers to buy

Qualifying Dimensions

Determining Dimensions

Relevant to including a customer type in a product-market Help identify core benefits

OR

Affect the customers purchase of a product or brand Can be further segmented

Determining vs. Qualifying Dimensions

Determining Determining Dimensions May Dimensions May Be Very Specific Be Very Specific

Determining Dimensions May Change

Key Issues

Different Dimensions For Different Submarkets

Qualifying Dimensions Are Important Too

Broader Issues in Selecting Segmenting Dimensions

Ethical Issues

Exploitation

Creates Unnecessary Wants

Does Harm
YouTube: Starbucks in China

What Are the Relevant Segmenting Dimensions?

Segmenting Product Markets (Exhibit 3-11)

Select (name) the broad product-market Identify potential customer Needs customer needs Form homogeneous Form homogeneous submarkets Identify determining dimensions

Best Practice Approach for Segmenting Product-Markets

Name possible Name possible product-markets

Evaluate product-market Evaluate product-market segments segment behaviors Estimate size of each product-market segments

More Sophisticated Techniques May Help in Segmenting

Clustering

Customer Database

Customer Relationship Management (CRM)

Cluster Analysis

Positioning

An Example of Positioning (Exhibit 3-13)

High moisturizing
Tone Dove 7 Zest Lever 2000

5
Lux 3 Coast 8

Safeguard

Nondeodorant

Deodorant
1

Dial Lifebuoy Lava

6

low moisturizing

You now 1. Know about defining generic markets and product-markets. 2. Know what market segmentation is and how to segment product-markets into submarkets. 3. Know three approaches to marketoriented strategy planning. 4. Know dimensions that may be useful for segmenting markets. 5. Know a seven-step approach to market segmentation that you can do yourself. 6. Know what positioning is and why it is useful.

Key Terms

Market Generic market Product market Market

segmentation Segmenting Market segment Single target market approach Multiple target market approach Combined target market approach

Combiners Segmenters Qualifying dimensions Determining dimensions Clustering techniques Customer relationship management (CRM) Positioning