Global Marketing and World Trade

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C H A P T E R T E N
MARKET SEGMENTATION, TARGETING, AND POSITIONING
Irwin/McGraw-Hill
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AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO

• Explain what market segmentation is, when to use
  it, and the five steps involved in segmentation.
• Recognize the different factors used to segment
  consumer and organizational markets.
• Understand the significance of heavy, medium, and
  light users and nonusers in targeting markets.
• Develop a market-product grid to use in
  segmenting and targeting a market.
• Interpret a cross tabulation to analyze market
  segments.
• Understand how marketing managers position
  products in the marketplace.

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PP10-AA Sneakers Story From Little Skirmishes
to all-out War

• Global 12 billion dollar sneaker market for all
  kinds of athletic shoes.
• Sneaker manufacturers are searching for new
  market segments of consumers and ways to
  differentiate their products from everyone
  elses.
• Reeboks marketing research shows that in 1971
  only 1 of every 27 women was involved in sports
  today it is 1 in 3!! Thus Reebok has put special
  emphasis on the female market.

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PP10-BB Market Segmentation Defined

• Market segmentation involves aggregating
  prospective buyers into groups that
• 1. Have common needs and
• 2. Will respond similarly to the marketing
  action.
• The groups that result from the
• market segmentation process are
• called market segments, a relatively
• homogeneous collection of prospective buyers.

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PP10-CC Product Differentiation Defined

• Product differentiation, in the broadest sense,
  involves a firms using different marketing mix
  activities, such as product features and
  advertising, to help consumers perceive the
  product as being different and better than
  competing products. The perceived differences
  may involve physical or nonphysical features,
  such as image or price.
• In a narrower sense, product differentiation
  involves a firms selling two or more products
  with different features targeted to different
  market segments.

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PP10-1 Market Segmentation Links Market Needs to
an Organizations Marketing Program

• Identify market needs
• Benefits in terms of
• Product Features
• Expense
• Quality
• Savings in time and convenience

Process of segmenting and targeting markets

• Execute marketing
• program
• A marketing mix
• in terms of
• Product
• Price
• Promotion
• Place

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PP10-2 Reebok Market-Product Grid

• Market Segment Product
• GROUP Running Aerobic Tennis
  Basketball Childrens Walking Cross Step
  Athletic Golf WITH
  Shoes Shoes Shoes Shoes
  Shoes Shoes Traing Traing clothing
  shoes
• General NEED 1981 1982
  1984 1984 1984 1986
  1988 1991 1993 1997
• runners P
  P
• Performance- aerobic
  P p
• conscious dancers
• consumers tennis
  P P
• (athletes) players
• basketball P P
• players
• step S P
• exercisers
• golfers P
  P
• Fashion- comfort S S
  S S
  S S
  S
• conscious style
• consumers conscious
• (nonathletes) walkers S
  S S S
  P P
• children P
• KEY PPrimary Market SSecondary Market

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PP10-DD When To Segment

• 1. One Product Multiple
  Market
  Segments
• 2. Multiple Products Multiple
  Market Segments
• 3. Segments of One Mass
  Customization

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PP10-EE Concept Check

• 1. Market segmentation involves aggregating
  prospective buyers into groups that have two key
  characteristics. What are they?
• 2. What is product differentiation?
• 3. The process of segmenting and targeting
  markets is a bridge between what two marketing
  activities?

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PP10-3 Five Steps in Segmenting and Targeting
Markets

• Steps in segmenting and
• targeting markets
• Form prospective buyers into segments
• Form products to be sold into groups
• Develop a market-product grid and estimate size
  of markets
• Select target markets
• Take marketing actions to reach target markets

Identify market needs

• Execute
• marketing
• program

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PP10-FF Criteria to Use in Forming Market
Segments

• 1. Potential for increased profit and ROI.
• 2. Similarity of needs of potential buyers
  within a
• segment.
• 3. Difference of needs of buyers among/across
  segments.
• 4. Feasibility of marketing action to reach a
  segment.
• 5. Simplicity and cost of assigning potential
  buyers
• to segments.

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PP10-4a U.S. Consumer Market Segmentation
Variables

• MAIN DIMENSION SEGMENTATION TYPICAL
• VARIABLES BREAKDOWNS

CUSTOMER CHARACTERISTICS
Northeast Midwest South West Under 10,000
10,000-24,999 25,000-49,999 50,000-99,999
100,000-249,999 250,000-499,999
500,000-999,999 1,000,000 or more
Region City Size Metropolitan area Density
Geographic Demographic
Metropolitan statistical areas (MSAs)
Consolidated metropolitan statistical areas
(CMSAs) Primary metropolitan areas (PMSAs)
Urban suburban small town rural
Male female
Gender Age Race Life Stage Birth Era Household
Size Residence tenure Marital Status
Under 6 6-11 12-17 18-24 25-34 35-44 45-54
55-64 65-74 75 and over
African-American Asian Hispanic
White/Caucasian Other
Infant preschool child youth collegiate
adult senior
Baby Boomer (1949-1965) Generation X
(1966-1976) Baby Boomlet/Generation Y
(1977-present)
1 2 3 4 5 or more
Own home rent home
Never married married separated divorced
widowed
(continued)
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PP10-4b U.S. Consumer Market Segmentation
Variables

• MAIN DIMENSION SEGMENTATION TYPICAL
• VARIABLES BREAKDOWNS

CUSTOMER CHARACTERISTICS
Socioeconomic Psychographic
Income Education
Under 15,000 15,000-24,999 25,000-34,999
35,000-49,999 50,000-74,999 75,000 and over
Some high school or less high school graduate
(or GED) some college or vocation/associate
degree college graduate post-graduate
Personality Values
Gregarious compulsive extroverted aggressive
ambitious etc.
Actualizers fulfilleds achievers experiencers
believers strivers makers strugglers
(continued)
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PP10-4c U.S. Consumer Market Segmentation
Variables

• MAIN DIMENSION SEGMENTATION TYPICAL
• VARIABLES BREAKDOWNS

BUYING SITUATIONS
In-store Direct Product features Needs Usage
rate User status Product knowledge Involveme
nt
Department specialty outlet convenience
supermarket superstore/mass merchandiser
catalog
Outlet type Benefits Sought
Usage Awareness/Intentions
Behavior
Mail order/catalog door-to-door direct
response internet
Situation specific general
Quality service price/value financing
warranty etc.
Light user medium user heavy user
Nonuser ex-user prospect first-time user
regular user
Unaware aware informed interested intending
to buy purchaser rejection
Minimum effort comparison special effort
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PP10-5 Patronage of Fast-Food and Drive-in
Restaurants

• USER OR SPECIFIC NUMBER NUMBER
  ACTUAL USAGE INDEX IMPORTANCE
• NONUSER SEGMENT (1,000S) PERCENTAGE
  CONSU MPTION () PER PERSON OF SEGMENT

HIGH
Users Total Users Nonusers
Total Nonusers Total
Heavy Users (14 per month) Medium Users (6-13
per month) Light Users (1-5 per month)
46,565 57,303 64,294 168,162
24.3 29.8 33.5 87.6
46.9 39.2 13.9 100.0
465 317 100 275
Prospects Nonprospects
?
?
0
0
?
?
0
0
0
0
LOW
23,861
12.4
---
Users and nonusers
192,023
100.0
100.0
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PP10-6 Comparison of Various Kinds of Users and
Nonusers for Wendys, Burger King,
McDonalds Restaurants
BURGER KING
McDONALDS
WENDYS
Sole restaurant
100 80 60 40 20 0
17.0
31.6
42.3

• Percentage of respondents
• (adults, 18 and over)

Primary Secondary Prospects Non- prospects
9.4
Users
60.6
12.5
9.9
41.7
32.1
Non-users
12.4
12.4
12.4
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PP10-7a Segmentation Variables for
Organizational Markets

• SEGMENTATION
• MAIN DIMENSION VARIABLES TYPICAL BREAKDOWNS

CUSTOMER CHARACTISTICS
Geographic
Global region U.S. region Metropolitan
area Density
Domestic International (Europe South America
Asia etc.) or Northeast Midwest South
West Metropolitan statistical areas (MSAs)
Consolidated metropolitan statistical areas
(CMSAs) Primary metropolitan statistical
areas (PMSAs) Urban suburban small town rural
2-digit sector 3-digit subsector 4-digit
industry group 5-digit industry 6-digit US
industry
Demographic
NAICS code NAICS code
Agriculture, forestry, fishing an hunting (11)
mining (21) utilities (22) construction (23)
manufacturing 31-33, etc.
(continued)
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PP10-7b Segmentation Variables for
Organizational Markets

• SEGMENTATION
• MAIN DIMENSION VARIABLES TYPICAL BREAKDOWNS

CUSTOMER CHARACTISTICS
Demographic (continued)
1-99 100-499 500-999 1,000-4,999 5,000 and
over Under 1 million 1 million-9.9 million
10 million-49.9 million 50 million- 99.9
million 100 million-499.9 million 500
million-999.9 million 1 billion- 4.9 billion
5 billion and over 1-9 10-49 50-99 100-499
500-999 1,000 and over
Number of employees Annual sales Number of
stores or locations
BUYING SITUATIONS
Nature of good Buying condition
Kind Where used Application Purchase
location Who buys Type of buy
Product service Installation component
supplies Office use limited production use
heavy production use
Centralized decentralized Individual buyer
group of buyers New buy modified rebuy straight
rebuy
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PP10-8 Selecting a Target Market for your
Fast-Food Restaurant Next to a Metropolitan
College
PRODUCTS MEALS
BETWEEN-
AFTER- BREAK-
MEAL DINNER MARKETS
FAST LUNCH SNACK
DINNER SNACK
STUDENT Dormitory Apartment Day Commuter Night
Commuter NONSTUDENT Faculty or Staff Live in
area Work in area
0 1 3
0 3 1
3 3
2 1 0
3 2
1 0 0
0 1
3
2
0 3 1
1 0 0
1 2
2 1 1
3 0
1 0
Key 3 Large market 2 meduim market 1 small
market 0 no market
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PP10-GGa Criteria to Use in Picking the Target
Segments

• 1. Size The estimated size of the market to
  determine whether or not it is worth going
  after.
• 2. Expected Growth The size of the market
  may be small, but if it is growing
  significantly it may be worth going after.
• 3. Competitive position The less competition
  the more attractive the market.

(continued)
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PP10-GGb Criteria to Use in Picking the Target
Segments

• 4. Cost of reaching the market Is the market
  accessible to a firms marketing actions? If
  not it should not be pursued.
• 5. Compatibility with the organizations
  objectives and resources.

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PP10-9 Advertising Actions to Reach Specific
Student Segments
PRODUCTS MEALS
BETWEEN-
AFTER-
MEAL DINNER MARKETS
LUNCH SNACK DINNER
SNACK
Dormitory students Apartment students Day
Commuter students Night Commuter students
1 3 0
3 3 3
1
1 3 2 1
0 0 1
3
2
Ad on flyer under windshield wipers of cars in
night parking lots Free Frosty with this coupon
when you buy a hamburger and french fries
Ads in buses flyers under windshield wipers of
cars in parking lots
Ad campaign Ten percent off all purchases
between 200 and 430 P.M. during winter quarter
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PP10-MNN Apples Segmentation Strategy
MARKETS PRODUCTS (PERSONAL COMPUTERS)
POWERMACINTOSH G3 ? ? ? ? ? ? ?
POWERBOOK G3 ? ? ? ? ? ? ?
IMAC ? ? ?
POWERMACINTOSH G3 SERVER ?
? ? ? ? ?
SECTOR Consumer/ household Kindergarten
thru 12th grade College and University Small
business Large business Design and Publishing
SEGMENT Family/ Games Students Faculty/
administration Students Faculty
administration Owners/ employees Administration
/ technical Media/graphics/ Internet Desktop
publishing
EDUCATION COMMERICAL
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PP10-HH Concept Check

• 1. What are some of the variables used to
  segment customer markets?
• 2. What are some criteria used to decide which
  segments to choose for targets?
• 3. Why is usage rate important in segmentation
  studies?

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PP10-II Definition of Cross Tabulation
A cross tabulation, or cross-tab is . . . .
a method of presenting and relating data having
two or more variables. Cross tabs are used to
analyze and discover relationships in the
data. An important aspect of cross tabulations is
deciding which two variables should be paired
together for analysis.
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PP10-10 Cross Tabulations
FREQUENCY
A. ABSOLUTE FREQUENCIES
AGE OF HEAD OF ONCE 2 OR
3 ONCE HOUSEHOLD A WEEK TIMES A
MONTH (YEARS) OR MORE A MONTH OR
LESS TOTAL
24 or less 25 to 39 40 or over Total
144 52 19
215 46 58
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133 82 69
87
238 272 179
135
586
B. ROW PERCENTAGES RUNNING PERCENTAGES
HORIZONTALLY
AGE OF HEAD OF ONCE 2 OR
3 ONCE HOUSEHOLD A WEEK TIMES A
MONTH (YEARS) OR MORE A MONTH OR
LESS TOTAL
24 or less 25 to 39 40 or over Total
67.0 24.2
8.8
100.0 34.6 43.6
21.8
100.0 34.4 29.0
36.6
100.0 46.4 30.6
23.0
100.0
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PP10-JJa The Value of Cross Tabulations

• The most widely used technique for organizing and
  presenting marketing data.
• The simple format allows direct interpretation
  and an easy means of communicating data to
  management.

(continued)
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PP10-JJb The Value of Cross Tabulations

• They have great flexibility and can be used to
  summarize experimental, observational, and
  questionnaire data.
• The ultimate value of cross tabulations to a
  marketing manager lies in obtaining a better
  understanding of the wants and needs of buyers
  and targeting key segments.

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PP10-KK Product Positioning

• Product Positioning refers to the place an
  offering occupies in consumers minds on
  important attributes relative to competitive
  offerings.
• 2 Approaches to Product Positioning
• 1. Head-to-Head Positioning involves competing
  directly with competitors on similar attributes
  in the same target market.
• 2. Differentiation Positioning involves seeking
  a less competitive, smaller market niche in
  which to locate a brand.

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PP10-LLa Perceptual Maps

• A key to positioning a product effectively is
  the perceptions of consumers. In determining a
  brands position and the preferences of
  consumers, companies obtain three types of data
  from consumers
• 1. Evaluations of the important attributes for a
  product class.
• 2. Judgments of the existing brands with the
  important attributes.
• 3. Ratings of an ideal brands attributes.

(continued)
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PP10-LLb Perceptual Maps

• From these data, it is possible to develop a
  perceptual map, a means of displaying via two
  dimensions the location products or brands occupy
  in the minds of consumers.

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PP10-11 GMs Strategy to Reposition Its Major
Car Brands
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PP10-MM Repositioning

• Repositioning involves changing the place an
  offering occupies in a consumers mind relative
  to competitive offerings.

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PP10-NN Concept Check

• 1. What is cross tabulation?
• 2. What are some advantages of cross
  tabulations?
• 3. Why do marketers use perceptual maps in
  product positioning decisions?

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PP10-A Hudsons Successful Pillow Ad Directed to
Three Segments of Sleepers
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PP10-B Market-Product Grid Showing Size of
Markets for Pillows for Three Different
Segments of Sleepers

• Products
• Medium
• Markets Soft Pillow Pillow Firm Pillow
• Stomach Sleepers L M
  S
• Back Sleepers M L
  M
• Side Sleepers S M
  L
• KEY L, Large Market M, medium market S, small
  market

L
L
L
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PP10-C Benefits () and Drawbacks (-) of a
Firms Market-Product Strategies

• PRODUCTS
• Markets Present New
• Present A. Market penetration B. Product
  development
• know products can gain
  marketing
• market segments well economies
  of scale
• - growth limited to this - need new RD and
• segment manufacturing can
• cannibalize sales
• New C. Market development D. Diversification
• can gain RD can mitigate swings in
• manufacturing economies core
  business by
• - need new sales training products in
  new mkts.
• and distribution - no economies of
  scale
• RD, mfg., or mktg.

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PP10-D Answers to Questions 7a in Chapter 10
Column Percentages, or Running Percentages
Vertically for Absolute Frequency Data in Figure
10-11, A

• FREQUENCY
• Age Once a week 2-3 times Once a month
• (in years) or more a month or less TOTAL
• 24 or less 53.0 29.1 14.0 36.7
• 25 to 39 16.9 32.4 21.5 22.7
• 40 or over 30.1 38.5 64.4 40.6
• TOTAL 100.0 100.0
  100.0 100.0

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PP10-E Ans. to Question 7b in Chapter 10 Total
Percentages, or Taking s of The Grand
Total for Absolute Frequency Data in Figure
10-11, A

• FREQUENCY
• Age Once a week 2-3 times Once a month
• (in years) or more a month or less TOTAL
• 24 or less 24.7 8.9 3.2 36.8
• 25 to 39 7.8 9.9 4.9 22.6
• 40 or over 14.0 11.9 14.8 40.6
• TOTAL 46.5 30.6
  22.9 100.0

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PP10-F Friskies Advertisement for a Special
Market Segment -- Senior Cats
Used with permission of Friskies Pet Care
Company, Inc..