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Chapter Seven: Segmentation, Targeting, and Positioning Chapter Objectives 1. Describe the STP process 2. Describe the bases marketers use to segment a market 3. Discuss the criteria for determining the attractiveness of a segment and whether it is worth pursuing (targeting) 4. Explain how a firm decides what type of segmentation strategy to use: undifferentiated, differentiated, concentrated, or micromarketing 5. Explain what positioning is and describe how do firms do it Annotated Chapter Outline PowerPoint Slides Instructor’s Notes The chapter objectives and roadmap are intended to help students understand the content to be discussed. Opening Vignette: Coke Zero The soft drink category is competitive market with numerous brands. Coca-Cola successfully launched a new product targeted at a group of consumers whose needs had not been met in the past, men who wanted lower calorie drinks but not “diet”. 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 identified a group of customers whose needs were not being met and offered an effective solution. Topic One: The Segmentation, Targeting, and Positioning Process 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. I. Step One: Establish Overall Strategy or Objectives. A. The strategy must be consistent with and derived from the firm’s mission and objectives, as well as its current situation (SWOT). Remind students that any strategy must be consistent with the firm’s mission statement and be based on the current assessments from SWOT analyses. II. Step Two: Profile Segments. A. Segment descriptions help firms understand the profile of the customers in each segment. This slide introduces the various segmentation methods. A multiple segmentation method approach can also be used – geogdemographics is one example and is discussed in a later slide. Group activity: Divide the class into groups. Have them choose either a manufacturer or national retailer for running shoes. Have them describe their segmentation strategy and then evaluate whether or not it is the best segmentation strategy for that firm. B. Geographic segmentation organizes customer into groups on the basis of where they live. Geographic information software (GIS) aids in such segmentation. Many firms use regional brands of popular products. For example, Frito-Lay introduced new flavours of Lays Potato Chips such as Wasabi and Curry in Vancouver and Toronto where large ethnic populations live. Understanding regional preferences can define a company’s success—or failure. Answer B C. Demographic segmentation groups consumers according to easily measured, objective characteristics, such as age, gender, income, and education. These variables represent the most common means to define segments, because 1. They are easy to identify. 2. Demographically segmented markets are easy to reach. Statistics Canada provides 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 Statistics Canada Web site, walk students through the information available about the postal code in which your university or college is located. D. Psychographic segmentation relies on how consumers describe themselves. 1. Self-values: goals for life, not just immediate goals, which help determine the benefits the target market wants from a product. 2. Self-concept: the image people have of themselves. 3. Lifestyles: how people live their lives to achieve their goals. Not just businesses segment their customers; segmentation also helps organizations that counsel drug addicts or other at-risk groups. Many parents are becoming increasingly concerned about safety issues when their children go online. This segment responded positively to information and tools to effectively manage Internet use in the home and to teach their kids to be Web savvy. Group Activity: Divide students into groups. Have each choose a product/service they like. Have them describe that product/service in terms of psychographics. E. The values and lifestyle survey (VALS2) describes segments on the basis of their resources, including income, education, health, energy level, and degree of innovativeness, on horizontal dimensions, and on the basis of their primary motivation, such as how they see themselves and how that self-image governs their activities, on vertical dimensions. 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. F. Behavioural segmentation groups consumers on the basis of the benefits they derive from products or services. Group activity: Have students identify products that provide different types of benefits. 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. 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. Using Multiple Segmentation Methods Multiple segmentation methods in combination offer firms more refined segmentation. Based on consumer surveys LIMRA identified 4 segments using demographic and lifestyle information. Data such as LIMRA can identify different segments The demographic data can identify the type of people in a segment, how firms might reach these people through the media or other selling vehicles, and how profitable the segments may be. For instance, “Worker Bees” are self-employed, over 40, and have relatively high incomes. The lifestyle data then can be used to help design products and promotional messages that are relevant to this group. For example, the owners of a retirement community may wish to study how this group envisions retirement. How can they adapt their concept and their marketing mix to appeal to this group? Answer A Case-in-Point Series This slide sets up the Case in Point which follows. This website represents an excellent application of lifestyle segmentation. It allows home buyers to identify neighbourhoods that match their particular lifestyles and needs. Using this screenshot of the lifestyles search page, discuss the various lifestyles identified on the site. How does this type of website create value for home buyers? III. Step 3: Evaluate Segment Attractiveness. This slide introduces the criteria used to determine segment attractiveness. More detailed slides follow that can be used to further elaborate on this discussion. A. Identifiable. Firms must characterize their market to design products or services that meet its needs. They also must ensure that market segments are sufficiently distinct, because too much overlap means they are unnecessarily expending efforts to create distinct marketing strategies. 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. B. Reachable. The best product or service cannot have an impact if the firm cannot reach the market through persuasive communications and product distribution. 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 they 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. C. Responsive. Customers in the segment must react positively to the firm’s offerings. Group activity: 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 pyjamas? What differences can you identify between these two types of product categories? D. Substantial. Firms need to measure the size of the identified market, because a market that is too small or lacks sufficient buying power cannot generate profits that will support marketing mix activities. Just because a firm can identify a segment does not necessarily mean it represents a good market. 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. 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. Children under 15 represent a very profitable market segment as this example illustrates, generating approximately $1000M. Answer C IV. Step 4: Select a Target Market. Assess both the attractiveness of the opportunity and the firm’s own competencies to serve the market. The choice will be based on which segment of jean buyers would be most responsive to the value proposition of the new jean line. If the product is designed as a fashion jean with the latest styling and colours then the young woman might represent the best target market. However if the product line is a functional jean, designed to be used for work and features a more durable fabric then the man may represent the best target market. Four strategies to serve the market: A. An undifferentiated segmentation strategy, or mass marketing considers everyone a potential consumer. Products/services in this category provide the same benefits to everyone. B. A differentiated segmentation strategy targets several market segments with different offerings and thus helps firms obtain bigger shares of the market while simultaneously increasing the market for their products overall. C. A concentrated segmentation strategy selects a single primary target market and focuses all its energies on providing a product to fit that market’s needs. D. With micromarketing or one-to-one marketing, a firm tailors its product or service to suit an individual customer’s wants or needs. 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 now get differentiated. For different products, consumers fall in different segments. Ask students: What are examples of products that use differentiated, concentrated, and micromarketing segmentation strategies? Differentiated = Vanilla Coca Cola Concentrated = Clinique cosmetics Micromarketing = Mariposa which makes custom-built bicycles for racers; Financial Services Providers such as BMO Harris Private Banking for very wealthy clients Answer D V. Step 5: Identify and Develop a Positioning Strategy. A. This step defines the marketing mix variables to give target customers a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products. Positioning is how consumers view a company’s products and services based on important attributes. It places a company in mind relative to competing products. Positioning may use one or more of the following strategies: Value – e.g. relationship of price to quality Product Attributes – e.g. innovation, quality, performance, and reliability Benefits and Symbolism Competition – e.g. head to head, differentiation Market Leadership – e.g. leadership position within an industry Answer: C B. Value is a popular positioning method because the relationship between price and quality represents one of the most important considerations when consumers make a purchase decision. Selling 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. The Bay. C. Product attributes are those product attributes that are most important to the target market. Like Selia, many students develop a list of product 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 product 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. D. Benefits and Symbolism can be powerful positioning tools. Ask students: What commercial symbols are salient to you? Do you feel positively or negatively toward these firms based on their commercial symbol? E. Competition, whether with a specific competitor or an entire product/service class, can position a firm’s offering effectively. 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. Topic Two: Positioning Strategies Perceptual maps depict positioning strategies by displaying, in two or more dimensions, the position of products or brands in consumers’ minds. These maps A. Contain ideal points that indicate where on the map a particular market segment’s ideal product would lie. 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. Go to the Positioning Toolkit on the OLC. Walk students through the positioning exercise or have them do this as a hand-in exercise. B. Determine consumer’s perceptions and evaluations in relation to their perceptions of competitors’ products or services. C. Identify competitors’ positions. D. Determine consumer preferences. E. Select appropriate positions. F. Help monitor the positioning strategy. Topic Three: Repositioning Sometimes firms must change their positioning. Firms reposition their brand in the marketplace in various ways, but the overriding purpose is to convey that the brand meets consumers’ changing needs. Baking soda is an excellent example of a product that has experienced many repositionings in the marketplace. The periodic introduction of new uses causes consumers to redefine why they might need baking soda. Ask students to identify a brand that might need repositioning, e.g., 7Up, or Ginger Ale. How would they reposition the brand? Instructor Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9780071320382, 9780070984929
