Defining The Company and Its Markets

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Defining The Company and Its Market(s)

• Segmentation, Targeting, and Positioning

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Todays Discussion

• Segmentation
• What is it?
• Why segment?
• Steps in segmentation
• Segmentation variables
• Segmentation resources/tools
• Targeting (selecting segments)
• Characteristics of good target segments
• Objective setting
• Positioning
• What is it and how do I do it?

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What is segmentation?

• Conceptual process of grouping together actual
  and potential customers in a market to select
  targets and design marketing programs.

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Why segment?

• Firms market and financial performance is highly
  dependent on the quality of the process employed
  to develop market segments.
• External Approach
• Customers seek different benefits
• Have to identify those benefits and
  characteristics of individuals that seek those
  benefits

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Steps in SegmentationWhat to Do

• Determine how to organize market into groups of
  customers
• Identify unique needs and wants common to each
  group
• Appraise the validity of a preferred segmentation
  scheme
• Decide which segments to address (target)
• Determine emphasis to give each segment

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Segmentation Variables

• Discuss characteristics of the following
• Geographic
• Demographic
• Social/psychological
• Benefits sought
• Behavioral
• i.e., these variables can be used to group
  customers together

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Segmentation Resources/Tools

• www.Census.gov
• Business, Economic Census, Latest Results,
  1998-2001, County Business Patterns, enter zip
• Demographic, Gateway to Census 2000, Demographic
  profiles, choose city and state
• Marketing research
• Cluster analysis
• www.Claritas.com
• North America, Claritas News, You are Where you
  live, See You are Where you live in action,
  use Microvision and/or Prizm, enter zip
• Examples of Segments

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Lifestyle Segmentation
Which PRIZM clusters characterize your zip code?
Find out at Claritas You are where you live
web site.
Prenticehall 2003 Kotler Slide
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Segmenting the Business Market

• Rackman and Vincentis proposed a segmentation
  scheme that classifies business buyers into three
  groups based on needs
• Price-oriented customers best served via
  transactional selling
• Solution-oriented customers best served by means
  of consultative selling
• Strategic-value customers best served by means
  of enterprise selling

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Question

• Do politicians employ segmentation? Describe and
  example you have witnessed directly or indirectly.

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Question

• Can you think of any companies that market the
  same product or service offering to multiple
  segments using different strategies? Are the
  different segments being offered different value
  propositions?

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Question

• As a result of recent privacy initiatives, many
  companies allow consumers to control the manner
  in which personal information is shared with
  other entities.
• How will this affect marketers ability to
  segment markets? Specifically, think about what
  would happen if credit card companies were
  categorically forbidden to sell customer data.

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Question

• Some people believe that market segmentation
  raises profound issues of equity? Do you agree?
  Why or why not?

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Characteristics of Good Target Segments

• Measurable
• Differentiated
• Identifiable
• Appropriate size
• Actionable!!

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Target Decisions Mass Marketing

• Aimed at the total market for a particular
  product
• undifferentiated marketing
• assumes all customers have similar needs
• single marketing mix
• 1 product _at_ 1 price
• 1 promotional program
• 1 distribution system

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Target Decisions Differentiated Marketing

• Dividing the total market into groups with common
  needs attempting to develop a marketing mix
  that appeals to 1 or more of these groups
• May be necessary when needs are similar within a
  group, but differ across groups
• Involves two options
• multisegment approach
• market concentration approach

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Target Decisions Niche Markets

• Narrow the market concentration approach even
  more
• focus on a small market
• segment has a unique, specific set of needs

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Ferrell et al. slide
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Ferrell et al slide
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Target market definition and selection guides
objective setting

• Objectives desired results
• Strategies how to allocate the resources
• Programs how to implement strategies (e.g., the
  marketing mix)

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Objectives

• Provide direction
• Help secure competitive advantage
• Guide allocation of resources
• Help achieve coordination

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Objectives Provide Direction

• Strategic objectives qualitative
• Grouped into three categories profitability,
  cash flow, and growth
• Operational objectives quantitative
• Provide specific goal
• Should be challenging but attainable

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PLC Objectives

• Introduction of product category
• Objective to create awareness and trial
• Offer a basic product
• Price at cost-plus
• Selective distribution
• Awareness dealers and early adopters
• Induce trial via heavy sales promotion
• Growth stage of product category
• Objective maximize market share
• Offer service, product extensions, warranty
• Price to penetrate
• Intensive distribution
• Awareness and interest mass market
• Reduce promotions due to heavy demand

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PLC Objectives

• Maturity of Product Category
• Objective maximize profit while defending market
  share
• Diversify brands/items
• Price to match or beat competition
• Intensive distribution
• Stress brand differences and benefits
• Increase promotions to encourage switching
• Decline of Product Category
• Objective reduce costs and milk the brand
• Phase out weak models
• Cut price
• Selective distribution
• Reduce advertising to levels needed to retain
  hard-core loyalists
• Reduce promotions to minimal levels

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Positioning Helps Secure Competitive Advantage

• Make it clear why customers should buy from the
  firm rather than from competitors (or why you
  should buy from the firm and its complementers)
  this is positioning
• What is unique and meaningful about the company
  and/or its offering

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Positioning

• Positioning is the heart of the product/market
  strategy
• Its purpose is to create a unique favorable
  images in customers minds uniqueness could come
  from
• Product, services, Personnel, Channel, or image
• Key is to determine key buying incentive or value
  proposition for the customer
• Evaluate how the target associates the firms
  brand (and the competitors brands) with what
  they value
• Marketing research
• Perceptual maps are useful
• Similar, but not the same, positioning strategies
  for different segments

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Steps in Product Positioning

• Who are our competitors in consumers minds?
• How are our competitors perceived and evaluated
  by consumers?
• How do consumers preferences compare with
  competitor positions?
• How should we position ourselves in consumers
  minds?

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Types of Positioning Strategies

• By attribute
• e.g., acceleration of auto
• By competition
• e.g., Suburban is larger than an Expedition
• By brand personality
• e.g. perfumes are fun, serious, lively, bold,
  sexy, assertive, etc.
• By function
• E.g., Raid kills bugsdead!

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Examples of Differentiation Strategies
Ferrell et al. slide
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Positioning

• Positioning statements
• To (target group and need) our (brand) is
  (concept) that (point-of-difference)
• Example To young, active soft-drink consumers
  who have little time for sleep, Mountain Dew is
  the soft drink that gives you more energy than
  any other brand because it has the highest level
  of caffeine.

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Discuss

• Think about the current television advertising
  campaign for KFC, Coors Light, Milk, or Federal
  Express.
• Using the preceding example as your guide,
  develop a positioning statement consistent with
  the current ad campaign for your chosen product.

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Perceptual Mapping A Tool for Positioning

• Perceptual Mapping
• Looks for holes in the market
• Looks at how an organization is viewed compared
  to competitors (from consumers perspective)
• Serves as a benchmark for repositioning our
  product (extremely difficult)

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Perceptual Maps
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Question

• Identify three examples of innovative and
  creative positioning strategies. What evidence
  can you collect to evaluate their business
  success?