CHAPTER 8 Segmenting and Targeting Markets This chapter begins with the learning outcome summaries, followed by a set of lesson plans for you to use to deliver the content in Chapter 8. • Lecture (for large sections) on page 3 • Company Clips (video) on page 5 • Group Work (for smaller sections) on page 6 Review and Assignments begin on page 7 • Review questions • Application questions • Application exercise • Ethics exercise • Video Assignment • Case assignment Great Ideas for Teaching Marketing from faculty around the country begin on page 17 LEARNING OUTCOMES 8-1 Describe the characteristics of markets and market segments A market is composed of individuals or organizations with the ability and willingness to make purchases to fulfill their needs or wants. A market segment is a group of individuals or organizations with similar product needs as a result of one or more common characteristics. 8-2 Explain the importance of market segmentation Before the 1960s, few businesses targeted specific market segments. Today, segmentation is a crucial marketing strategy for nearly all successful organizations. Market segmentation enables marketers to tailor marketing mixes to meet the needs of particular population segments. Segmentation helps marketers identify consumer needs and preferences, areas of declining demand, and new marketing opportunities. 8-3 Discuss criteria for successful market segmentation Successful market segmentation depends on four basic criteria: 1) a market segment must be substantial and have enough potential customers to be viable, 2) a market segment must be identifiable and measurable, 3) members of a market segment must be accessible to marketing efforts, and 4) a market segment must respond to particular marketing efforts in a way that distinguishes it from other segments. 8-4 Describe the bases commonly used to segment consumer markets Five bases are commonly used for segmenting consumer markets. Geographic segmentation is based on region, size, density, and climate characteristics. Demographic segmentation is based on age, gender, income level, ethnicity, and family life cycle characteristics. Psychographic segmentation includes personality, motives, and lifestyle characteristics. Benefits sought is a type of segmentation that identifies customers according to the benefits they seek in a product. Finally, usage segmentation divides a market by the amount of product purchased or consumed. 8-5 Describe the bases for segmenting business markets Business markets can be segmented on two general bases. First, businesses segment markets based on company characteristics, such as customers’ geographic location, type of company, company size, and product use. Second, companies may segment customers based on the buying processes those customers use. 8-6 List the steps involved in segmenting markets Six steps are involved when segmenting markets: 1) selecting a market or product category for study; 2) choosing a basis or bases for segmenting the market; 3) selecting segmentation descriptors; 4) profiling and evaluating segments; 5) selecting target markets; and 6) designing, implementing, and maintaining appropriate marketing mixes. 8-7 Discuss alternative strategies for selecting target markets Marketers select target markets using three different strategies: undifferentiated targeting, concentrated targeting, and multi-segment targeting. An undifferentiated targeting strategy assumes that all members of a market have similar needs that can be met with a single marketing mix. A concentrated targeting strategy focuses all marketing efforts on a single market segment. Multi-segment targeting is a strategy that uses two or more marketing mixes to target two or more market segments. 8-8 Explain how CRM can be used as a targeting tool Companies that successfully implement CRM tend to customize the goods and services offered to their customers based on data generated through interactions between carefully defined groups of customers and the company. CRM relies on four things to be successful: personalization, time savings, loyalty, and technology. Although mass marketing will probably continue to be used, the advantage of CRM cannot be ignored. 8-9 Explain how and why firms implement positioning strategies and how product differentiation plays a role Positioning is used to influence consumer perceptions of a particular brand, product line, or organization in relation to competitors. The term position refers to the place that the offering occupies in consumers’ minds. To establish a unique position, many firms use product differentiation, emphasizing the real or perceived differences between competing offerings. Products may be differentiated on the basis of attribute, price and quality, use or application, product user, product class, or competitor. TERMS benefit segmentation market segment product differentiation cannibalization market segmentation psychographic segmentation concentrated targeting strategy Multi-segment targeting strategy repositioning demographic segmentation niche satisficers 80/20 principle optimizers segmentation bases (variables) family life cycle (FLC) perceptual mapping target market geodemographic segmentation position undifferentiated targeting strategy geographic segmentation positioning usage-rate segmentation market LESSON PLAN FOR LECTURE Brief Outline and Suggested PowerPoint Slides: Learning Outcomes and Topics PowerPoint Slides LO1 Describe the characteristics of markets and market segments 8-1 Markets and Market Segments 1: Segmenting and Targeting Markets 2: Learning Outcomes 3: Learning Outcomes 4: Markets and Market Segments 5: Characteristics of a Market 6: Market Segmentation 7: The Concept of Market Segmentation LO2 Explain the importance of market segmentation 8-2 The Importance of Market Segmentation 8: The Importance of Market Segmentation 9: The Importance of Market Segmentation LO3 Discuss criteria for successful market segmentation 8-3 Criteria for Successful Segmentation 10: Criteria for Successful Segmentation 11: Criteria for Segmentation LO4 Describe the bases commonly used to segment consumer markets 8-4 Bases for Segmenting Consumer Markets 12: Bases for Segmenting Consumer Markets 13: Bases for Segmentation 14: Geographic Segmentation 15: Benefits of Regional Segmentation 16: Demographic Segmentation 17: Age Segmentation 18: Gender Segmentation 19: Income Segmentation 20: Ethnic Segmentation 21: Family Life Cycle 22: Exhibit 8.1: Family Life Cycle 23: Psychographic Segmentation 24: Bases for Psychographic Segmentation 25: Personality and Motive Segmentation 26: Lifestyle Segmentation 27: Geodemographic Segmentation 28: Benefit Segmentation 29: Usage-Rate Segmentation LO5 Describe the bases for segmenting business markets 8-5 Bases for Segmenting Business Markets 30: Bases for Segmenting Business Markets 31: Bases for Segmenting Business Markets 32: Company Characteristics 33: Buying Processes 34: Buyer Characteristics LO6 List the steps involved in segmenting markets 8-6 Steps in Segmenting a Market 35: Steps in Segmenting a Market 36: Steps in Segmenting Markets LO7 Discuss alternative strategies for selecting target markets 8-7 Strategies for Selecting Target Markets 37: Strategies for Selecting Target Markets 38: Target Market 39: Strategies for Selecting Target Markets 40: Undifferentiated Targeting Strategy 41: Undifferentiated Targeting Strategy 42: Concentrated Targeting Strategy 43: Concentrated Targeting Strategy 44: Multisegment Targeting Strategy 45: Multisegment Targeting Strategy 46: Costs of Multisegment Targeting Strategy LO8 Explain how CRM can be used as a targeting tool 8-8 CRM as a Targeting Tool 47: CRM as A Targeting Tool 48: CRM 49: CRM Trends LO9 Explain how and why firms implement positioning strategies and how product differentiation plays a role 8-9 Positioning 50: Positioning 51: Positioning 52: Positioning of Procter & Gamble Detergents 53: Effective Positioning 54: Product Differentiation 55: Perceptual Mapping 56: Positioning Bases 57: Repositioning 58: Chapter 8 Video Suggested Homework: • The end of this chapter contains assignments for the Numi Organic Tea video and the Harley Davidson case. • This chapter’s online study tools include flashcards, visual summaries, practice quizzes, and other resources that can be assigned or used as the basis for longer investigations into marketing. LESSON PLAN FOR VIDEO Company Clips Segment Summary: Numi Organic Tea Numi Organic Tea describes how its sampling program helps position the brand with its target markets. Its premium position ties naturally into the customer outlined in the film, but Numi is also interested in expanding outside of the major tea drinker into more casual tea drinkers. PRE-CLASS PREP FOR YOU: PRE-CLASS PREP FOR YOUR STUDENTS: • Preview the Company Clips video segment for Chapter 8. This exercise reviews concepts for LO1, LO2, LO3, LO4, and LO5. • Review your lesson plan. • Make sure you have all of the equipment needed to show the video to the class, including the DVD and a way to project the video. • Or you can stream the video HERE • Have students take notes on the following terms and concepts: market segment, market segmentation, segmentation criteria, bases for segmenting consumer markets, steps in segmenting a market, target strategy, and positioning. • Assign students to locate a couple of premium coffee/tea stores in their area, and using either the phone or the Internet, have them research how they position themselves in their market. VIDEO REVIEW EXERCISE ACTIVITY Warm Up • Begin class with a review of the criteria for successful segmentation. Ask students to brainstorm to anticipate Numi’s segmentation scheme, given its premium tea products. In-class Preview • On the board, copy the top-level details of the map of consumer market segments. Do not fill in the entire map. Review the five bases with the class, if needed. • Have students copy your work onto a sheet of paper that they can use to take notes while watching the video. • Tell students that they may use any notes they made when they were familiarizing themselves with the key terms and concepts from their pre-class work. • Explain that they are to gather data from the video to “map” Numi’s segmentation variables. Viewing (Solutions below.) 1. In the first part of the video, Jen Mullin, the vice president of Marketing for Numi Organic Tea, clearly describes their typical customer. Who is that customer and how did the Numi marketing team figure that out? 2. What is Numi's principle marketing plan? In what way does Numi's marketing team use what they know about their target demographic to implement their marketing plan? Follow-up • Have students research and prepare a one-page report on Numi Organic Tea market strategies and positioning. Students must cite their work and print out or copy a page that clearly advertises to this market segment with labels identifying marketing bases or variables evident in the ad. Solutions for Viewing Activities: 1. In the first part of the video, Jen Mullin, the vice president of Marketing for Numi Organic Tea, clearly describes their typical customer. Who is that customer and how did the Numi marketing team figure that out? Answer: Quantitative data revealed their typical customer as a female, college-educated tea lover, possibly an “eco-mom.” Numi Organic Tea also identifies potential customers through what they want from the product--those who are looking for organic, fair-trade, premium quality tea 2. What is Numi's principle marketing plan? In what way does Numi's marketing team use what they know about their target demographic to implement their marketing plan? Answer: Numi’s marketing plan includes providing opportunities for potential customers to sample their teas, rather than the more traditional print and television advertising. Numi Organic Tea selects ways to provide samples to target markets, such as an Earth Day gift bag through JetBlue or by donating tea to a cause socially conscious women would care about, so that they know they are putting a sample of their product into the hands of potential customers whom they believe are most likely to want to buy more Numi tea. LESSON PLAN FOR GROUP WORK In most cases, group activities should be completed after some chapter content has been covered, probably in the second or third session of the chapter coverage. (See “Lesson Plan for Lecture” above.) Class Activity – Bank Marketing Give students the following statistics about the identity of depositors at banks in the United States. Age Group Percent of Households Percent of Deposits 15 24 6 Less than 1 25 34 23 6 35 44 21 14 45 54 15 14 55 and over 35 66 Ask students who they think the banks should be targeting and why. Who should the banks be targeting for the future? What can the banks do to appeal to their chosen market or markets? How do the segments differ in their needs for services? Have your class brainstorm ideas of services to offer. Possible services include: • Free checking accounts • Safety-deposit boxes • Free credit cards • Low interest rates on installment loans • High interest rates on checking and savings accounts • High-interest certificates of deposit • Pre-approved car loans • Aid in formulating budget and savings plans • Lines of credit • Seminars on financial planning, health, and travel • Traveler’s checks Can the students think of other services to offer? Banks have selected and bundled these services into packages to appeal to certain market segments. How would the class bundle these services for the different segments? Factors to remember: The “30-something” consumer is in the prime borrowing years, and customers will inevitably move from being borrowers to being savers and investors with time. REVIEW AND ASSIGNMENTS FOR CHAPTER 8 REVIEW QUESTIONS 1. You are the marketing manager for a specialty retailer that sells customized handbags. Write a memo to your boss describing how the company could benefit from implementing a CRM system and some ideas for collecting data from customers in an innovative way. Answer: Students’ answers will vary. Possible reasons include stocking styles customers like and managing databases to send out targeted marketing message. Ideas include sending clients birthday postcards designed to look like the latest style of handbag; recording the colors and styles of bag a customer has chosen, and then sending out information around various holidays encouraging the customer to make a holiday handbag; inviting customers to host “Purse Parties” at your shop, where as the hostess they would receive a special custom product from the store; ask customers to complete a questionnaire regarding the features they find important in a handbag, how many handbags they own, how many they would like to own; if they like their wallet and key chain to coordinate with their bag; and many others. Memo To: [Boss's Name] From: [Your Name], Marketing Manager Subject: CRM System Benefits for Customized Handbags Benefits of CRM: 1. Better Customer Insights: Track preferences and purchase history for personalized marketing. 2. Increased Loyalty: Deliver tailored experiences and boost retention through personalized offers. 3. Efficient Marketing: Automate campaigns based on customer data for targeted promotions. Innovative Data Collection: • Style Quizzes: Gather customer preferences through interactive online quizzes. • Customization Tracking: Use past handbag design choices to predict trends. • Feedback Surveys: Collect post-purchase insights for improvement. A CRM will enhance customer engagement and streamline our marketing efforts. Best, [Your Name] 2. Choose a product category (e.g., blue jeans) and identify at least three different brands and their respective positioning strategies. How is each position communicated to the target audience? Answer: Students should be able to determine positioning strategies for the individual products in their chosen category through media advertising, price, and information provided at the company’s Web page. Product Category: Athletic Shoes 1. Nike • Positioning Strategy: Performance and innovation-driven, empowering athletes. • Communication: Through motivational ads featuring top athletes, slogans like "Just Do It," and emphasis on cutting-edge technology (e.g., Air and Flyknit). 2. Adidas • Positioning Strategy: Style and versatility, blending sports and lifestyle. • Communication: Focus on trendy designs and collaborations with influencers, using the tagline "Impossible is Nothing" to connect with both athletes and fashion-conscious consumers. 3. New Balance • Positioning Strategy: Comfort, quality, and heritage. • Communication: Emphasizes craftsmanship, comfort, and "Made in the USA" in ads and promotions, appealing to consumers looking for reliable, everyday wear. APPLICATION QUESTIONS 1. Mercedes is thinking about advertising its cars to college students. Do you think that college students are a viable potential market for Mercedes? Why or why not? Answer: Why college students WOULD be a viable market: A large percentage of college students today work full- or part-time and make a lot more money than college students of yesteryear. Thus, they have more disposable income and want to spend their money on something that shows prestige. Prestige products that have successfully targeted college students include credit cards (especially American Express) in an attempt to build loyalty before graduation. Once college students graduate and make larger incomes, it may be too late to capture this market. Mercedes has successfully targeted the up-and-coming professional with its C-class series, with a lower price point than the popular E-class and S-class. The company’s less expensive C230 coupe priced at $25,000 could capture students so that they always buy a Mercedes. Why college students WOULD NOT be a viable market: Mercedes has always targeted an upscale, established market. It has really never positioned itself as a car for youth but as a car that financially successful people work up to. The company could not use any of its current vehicles to target college students because of the price points, and a new, smaller Mercedes would have to be so inexpensive that it would cast doubt on the rest of its line of vehicles. Changing its positioning that radically could cause the brand to lose some of its very loyal current customers. In addition, college students may not be very interested in the Mercedes brand, as it is seen as an “older” person’s car. 2. How are visitors to the following Web site segmented when seeking relevant job openings? Try this search engine and report your results: http://www.careermag.com/. Answer: The Web site uses both consumer and business target markets and segments the market in several different ways, mostly by benefit and geographic segmentation. For benefit segmentation, the Web site allows users to search for career information by profession (there is an option to “Search by Industry” that allows users to search for career descriptions). That part of the Web site also uses geographic segmentation by allowing users to type in a city and state to search for available positions in certain professions. The site also targets “Job Seekers,” another consumer market that is based on benefit segmentation. Business segments are also welcome to use the site. The site targets employers who are seeking job candidates and the self-employed. Employer services are listed at the bottom of the Web page. Thus, the Web site uses a multisegment approach to its segmentation. 3. As a marketing consultant for a chain of hair salons, you have been asked to evaluate the kids’ market as a potential segment for the chain to target. Write a memo to your client showing your evaluation of the kids’ segment against the four criteria for successful market segmentation. Answer: The criteria for successful market segmentation that should appear in students’ answers are: 1) substantiality (Is the kids’ segment large enough to target?), 2) identifiability and measurability (Is the kids’ segment easy to identify and can it be measured?), 3) accessibility (Are the kids’ segment and their parents easy to reach?), and 4) responsiveness (How will kids or their parents react to the product?). One of the issues that answers may contain is whether you should target the kids or the parents in your marketing efforts. 4. Choose magazine ads for five different consumer products. For each ad, write a description of what you think the demographic characteristics of the targeted market are. Answer: Students will choose a variety of ads but should clearly understand demographics and psychographics. Demographic segmentation is the method of dividing markets on the basis of demographic variables, such as age, gender, income, ethnic background, and family life cycle. Psychographic segmentation is based on personality, motives, lifestyles, and geodemographics. 1. Apple iPhone Ad • Target Demographic: Young professionals (18-35), tech-savvy, higher income, urban, and trendy individuals who value innovation and premium devices. 2. Toyota Hybrid Car Ad • Target Demographic: Environmentally conscious adults (30-50), middle to upper class, suburban, family-oriented, and focused on fuel efficiency and sustainability. 3. L'Oréal Anti-Aging Cream Ad • Target Demographic: Women (40-60), middle to upper income, focused on personal appearance, health-conscious, and interested in beauty products for mature skin. 4. Coca-Cola Ad • Target Demographic: Teens and young adults (13-25), diverse, fun-loving, socially active, and interested in trendy, refreshing beverages. 5. Rolex Watch Ad • Target Demographic: Affluent men and women (35-60), luxury-focused, status-conscious, with a preference for high-end, timeless fashion and accessories. 5. Investigate how Delta Airlines uses its Web site, http://www.delta-air.com/, to cater to its market segments. Answer: Delta uses usage-rate and benefit segmentation in its Web site. The market segments that are obvious in Delta’s Web site are frequent flyers (usage-rate segmentation, as evidenced by the “SkyMiles” link) and travelers who are either current Delta customers or who are considering using Delta for travel (benefit segmentation, as evidenced by several services, including the search for flights and customer service). 6. Choose five ads from business publications such as the Wall Street Journal, Fortune, or Bloomberg BusinessWeek. For each ad, write a description of how you think the company has segmented the business market. Answer: Students’ answers should contain the bases on which segmentation was done: the bases for segmenting business markets include company characteristics (geographic location, type of company, company size, and product), buying processes (key purchasing criteria, purchasing strategies, or personal characteristics of the buyers), and customer relationships. 1. IBM Cloud Solutions Ad (WSJ) • Segmentation: Large enterprises and IT departments in industries like finance, healthcare, and manufacturing. Targeting companies seeking advanced, scalable cloud infrastructure for data management and AI integration. 2. American Express Business Card Ad (Fortune) • Segmentation: Small to medium-sized businesses (SMBs) and startups needing flexible credit, financial tools, and rewards programs tailored to business expenses and growth management. 3. Cisco Networking Solutions Ad (Bloomberg BusinessWeek) • Segmentation: Mid to large corporations requiring secure, high-performance networking and communication solutions. Targeting industries such as tech, education, and government. 4. Deloitte Consulting Services Ad (Fortune) • Segmentation: Multinational corporations and C-suite executives in sectors like finance, energy, and healthcare seeking expert advisory services in digital transformation, strategy, and risk management. 5. UPS Logistics Ad (WSJ) • Segmentation: E-commerce businesses, retailers, and manufacturers that require global supply chain management, logistics, and shipping solutions to optimize delivery and operations. 7. Write a letter to the president of your bank suggesting ideas for increasing profits and enhancing customer service by improving segmentation and targeting strategies. Make your suggestions specific. Answer: Students’ answers should describe two or more variables that should be used to segment the market, explain why they are important, and suggest how using those variables will help the bank to better serve those segments. Dear [President's Name], I believe we can boost profits and enhance customer service by refining segmentation and targeting. Here are my suggestions: 1. Tailored Products: Offer digital banking packages for Millennials/Gen Z, retirement plans for retirees, and business banking tools for small business owners. 2. Personalized Communication: Send young professionals savings tips and high-net-worth individuals exclusive investment opportunities. 3. Loyalty Program: Create a tiered system to reward long-term customers with benefits like fee waivers and financial planning sessions. These strategies will enhance customer satisfaction and profitability. Sincerely, [Your Name] 8. Form a team with two or three other students. Create an idea for a new product. Describe the segment (or segments) you are going to target with the product and explain why you chose the targeting strategy you did. Answer: Students should clearly describe a market segment as a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. The segments should be meaningful groups that are relatively similar and identifiable. Positioning is the development of a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization. The students should position the product in relation to competing offerings. Product Idea: Smart Water Bottle with Hydration Tracking Target Segments: 1. Health-Conscious Adults (25-45): Fitness enthusiasts and wellness-focused individuals who value staying hydrated and tracking their health metrics. 2. Busy Professionals (30-50): Working professionals who often forget to drink enough water during the day and seek convenient reminders for hydration. Targeting Strategy: We chose these segments because they value convenience, health monitoring, and lifestyle efficiency. The smart bottle, which tracks hydration and sends reminders via a mobile app, appeals to their tech-savvy nature and focus on health, making it highly relevant to their needs. 9. Go to the Web sites of JCPenney, http://www.jcpenney.com, and Target, http://www.target.com. Compare which is more product-focused and which is more brand focused. Which company’s approach do you think will appeal more to the “Holy Grail” target market of 25- to 35-year-old women? Answer: When comparing the websites of JCPenney and Target, Target's site is more brand-focused, showcasing exclusive collections like Hearth & Hand with Magnolia and Tabitha Brown for Target, which appeal to specific lifestyle choices and aesthetics. This focus on brands helps differentiate Target as a lifestyle retailer with unique offerings. In contrast, JCPenney’s site is more product-focused, emphasizing specific categories like home goods and apparel without as much emphasis on exclusive brand partnerships. This product-centric approach appeals to customers looking for variety and deals on basic items. Target’s brand-driven approach likely appeals more to the "Holy Grail" target market of 25- to 35-year-old women, who are often drawn to curated, stylish brands and collaborations that reflect their lifestyle and values. 10. Is it possible to identify a single market for two distinctly different products? For example, how substantial is the market comprised of consumers who use Apple and who drive Volkswagens? Can you think of other product combinations that would interest a single market? (Do not use products that are complementary, like a bike and a bike helmet. Think of products, like the iPod and the car, that are very different.) Complete the following sentences and describe the market for each set of products you pair together. Consumers of: Propel fitness water could also be a target market for ______________. Proactiv Solution skin care products could also be a target market for ______________. Alienware computers could also be a target market for ______________. Specialty luggage tags could also be a target market for _______________. Answer: 1. Consumers of Propel fitness water could also be a target market for: high-end gym memberships. These consumers are likely health-conscious and invested in fitness, making them a good fit for premium fitness services. 2. Proactiv Solution skin care products could also be a target market for: fashionable apparel. Individuals concerned with their appearance and maintaining clear skin might also be interested in trendy clothing to complement their overall look. 3. Alienware computers could also be a target market for: gaming consoles. Gamers who invest in high-performance PCs are likely to also purchase high-end gaming consoles for a diverse gaming experience. 4. Specialty luggage tags could also be a target market for: luxury travel accessories. People who buy personalized or high-quality luggage tags might also be interested in other premium travel items like designer travel bags or travel pillows. APPLICATION EXERCISE How tightly do you fit into a particular market segment? Do you think you can be neatly classified? If you think your purchasing habits make you an enigma to marketers, you may need to think again. Activities 1. Have students visit the following website: http://geography.about.com/od/obtainpopulationdata/a/claritas.htm. Click on the “You Are Where You Live” link and type in your zip code.. The database will generate many cluster descriptions based on your ZIP code. Depending on the functionality of the Web site at the time you access the database, you may need to reenter your ZIP code multiple times if you want to read all the cluster descriptions. 2. Now pick a product category, such as automobiles, athletic shoes, beverages, or health and beauty products. Then think about which products in that category would appeal to each of the clusters generated by your ZIP code search. For example, a car that appeals to a cluster titled “Young Bohemians” may not be the car of choice for the cluster “Pools and Patios.” If your search generated only one cluster type, you may wish to enter other ZIP codes for your area of town or for your region. 3. Create a perceptual map for the product you chose. Write a short statement that describes the overall position of each product with an explanation of why you located it where you did on the perceptual map. Purpose: This exercise quickly shows students the limitations of using only demographics to describe their customers, and really clarifies the process of segmentation and positioning for them. Setting It Up: Form groups of five to eight persons. Instruct each group to pick a product category, preferably something they are familiar with (see suggestions below). Plan about 15 minutes for the exercise. This exercise was inspired by the following Great Idea in Teaching Marketing: Kim McKeage University of Maine STUDENTS PRACTICE MAKING MARKET/PRODUCT GRIDS ON THEMSELVES This in-class project has students use a segmentation scheme that they have already studied. This could include: • VALS • Lifestyle • Price Sensitivity • Quality Sensitivity • Attributes/Features Desired • Involvement • Demographics • Geographic Region • Product Usage (heavy vs. light users) If students wish to use VALS, I instruct them ahead of time to get on the internet and access the VALS survey online so that they can determine their type. On the day when we do this exercise, students form groups of five to eight persons. The group is instructed to pick a product category. I recommend the following categories to them as items they might be familiar with: • Automobiles (cars, trucks, SUVs, etc.) • Athletic Shoes • Recreational Products (sports equipment, hiking gear, etc.) • Entertainment Products (movies, CDs, etc.) • Food (packaged, grocery, or restaurants) • Computer Software/Hardware • Clothing Students then have to describe which market segments are represented in their group according to the segmentation scheme(s) they chose to use. They must also develop a market/product grid to describe how to target different products (within their chosen category) toward the different market segments represented within their group. The product positions can be for existing products or imagined products (especially if no existing product fits a position they want). Students must discuss the general overall “position” of the product and, for fantasy products, how they would accomplish that positioning. For example, if they want to position an athletic shoe as a “performance” (overall position) shoe, they might show advertisements with sports professionals using the shoe under demanding circumstances. To get credit on the exercise, students must write up a complete market/product grid with their accompanying notes. Some of the groups present their solution to the class. This exercise quickly shows students the limitations of using only demographics to describe their customers, and really clarifies the process of segmentation and positioning for them. ETHICS EXERCISE Tobacco companies are frequently criticized for targeting potential customers below the legal age to purchase and use their products. Critics cite Joe Camel and the Marlboro man as images meant to make smoking appealing to young people. If tobacco companies are actually following this particular demographic targeting strategy, most would agree that it is unethical if not illegal. 1. Is marketing tobacco products to younger consumers unethical? Answer: Marketing tobacco products to younger consumers is unethical insofar as they are more susceptible to being swayed by marketing messages and to conform to group behaviors. If smoking is considered cool among a certain group of young people, it may be hard to resist the temptation to start the unhealthy habit. 2. Many are beginning to argue that fast-food companies, such as McDonald’s and Burger King, are knowingly marketing unhealthy food to consumers. Is it unethical for fast-food companies to market kids’ meals to children? Answer: Marketing fast food to children is becoming an increasingly hot debate, as time-pressed parents are relying on companies like McDonald’s and Burger King to provide quick and easy meals for their hungry children. What was once a special treat has become a regular occurrence. That shift in consumer behavior has engendered the ethical concerns behind the consumption of high levels of fast food and its relationship to the high numbers of children who are overweight and who suffer from Type II diabetes. 3. What does the AMA Statement of Ethics have to say about marketing unhealthy or harmful products to consumers, particularly children and young adults? Go to the AMA Web site at http://www.marketingpower.com to review the statement. Write a brief paragraph summarizing where the AMA stands on this important issue. Answer: The first rule mentioned in the AMA Statement of Ethics is this: The marketer must not knowingly do harm. Additionally, the statement says that in the area of product development, the marketer must disclose all substantial risks associated with product or service usage. In the past, however, even providing specific operating instructions or instructions for use and clearly marking the product with warning labels has not been enough to indemnify some companies in various lawsuits. Furthermore, “unhealthy” can be a question of degree. For example, if someone eats at McDonald’s once a month, it probably won’t detrimentally affect the person’s overall health. If, however, someone eats there once a day, the person will probably experience obesity, hypertension, and other health problems related to high consumption of fatty foods. To further complicate matters, some people may consider some products healthy that others do not. For example, most people consider meat a healthy source of complex proteins for brain and muscle development; vegetarians disagree, finding meat to be an unhealthy source of fats and fatty acids that are difficult for the body to digest. In the area of marketing to adults, the question remains: Who should be responsible for regulating the behavior—the person consuming the cigarettes or the fast food, or an external body such as the government or industry trade association? As for the aggressive marketing of unhealthy products to children, the practice could definitely be considered irresponsible and unethical. [You may wish to have students discuss this issue in detail and make a list of pros and cons on the board as students raise various arguments.] VIDEO ASSIGNMENT: Numi Organic Tea 1. Jen Mullin, the vice president of Marketing for Numi Organic Tea, describes their typical customer as a female, college-educated tea lover, possibly an “eco-mom.” What type of market segmentation has she used to identify this customer group? A. Geographic segmentation B. Demographic segmentation C. Ethnic segmentation D. Psychographic segmentation Answer: B Demographic segmentation involves segmenting markets by age, gender, income, ethnic background, and family life cycle. 2. Another way Numi Organic Tea identifies potential customers is through what they want from the product; they are looking for organic, fair-trade, premium quality tea, according to the video. What type of market segmentation is used to identify customers in this way? A. Geographic segmentation B. Demographic segmentation C. Benefit segmentation D. Usage-rate segmentation Answer: C Benefit segmentation is the process of grouping customers into market segments according to the benefits they seek from the product. 3. True or False? Numi’s marketing plan includes providing opportunities for potential customers to sample their teas, rather than the more traditional print and television advertising. Using this method, Numi wants to get samples of their tea to a wide variety of different types of consumers, to attract new customers from many different groups. Answer: False Numi Organic Tea selects ways to provide samples to target markets, such as an Earth Day gift bag through JetBlue or by donating tea to a cause socially conscious women would care about, so that they know they are putting a sample of their product into the hands of potential customers whom they believe are most likely to want to buy more Numi tea. 4. Because Numi Organic Tea has identified more than one target market, for example, “eco-moms,” college students, and family travelers, they should be particularly aware of the ______________, which helps explain how consumption patterns differ at different stages determined by a combination of age, marital status, and the presence or absence of children. A. Family life cycle B. 80/20 principle C. Undifferentiated targeting strategy D. Concentrated targeting strategy Answer: A Family life cycle is a series of stages determined by a combination of age, marital status, and the presence or absence of children. 5. True or False? When Jen Mullin explains that her company’s tea is sought after as a product to include in gift bags and other promotional giveaways by companies and other organizations, she is recognizing the companies who ask Numi to provide tea samples as optimizers. Answer: False Optimizers consider numerous suppliers carefully before selecting one; the companies who seek out Numi Tea would be satisficers, who contact familiar suppliers. 6. Mullin talks about ______________ the Numi brand, developing a specific marketing mix that will influence potential customers’ overall perception of the brand, by targeting natural health food stores, university coffee shops, and fine dining establishments. A. Segmenting B. Satisficing C. Optimizing D. Positioning Answer: D Positioning is developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general. 7. True or False? To graphically map the “channel conflict” between marketing Numi Tea to premium spas, hotels, and restaurants and selling the same brand at mass market stores such as Target, the company could employ perceptual mapping. Answer: True Perceptual mapping is a means of displaying, in two or more dimensions, the location of products or brands in customers’ minds. 8. The demographic variable that Numi Tea marketers were examining when they recognized that people who had discovered their product at a high-end spa or fine restaurant often shopped for groceries at Costco was ______________. A. Age B. Income C. Ethnicity D. Gender Answer: B Income is a popular demographic variable for segmenting markets because income level influences consumers’ wants and determines their buying power. 9. Numi Tea uses premium ingredients to create a premium tea at an affordable price, according to Jen Mullin. This is a form of ______________ that the company uses to distinguish their products from those of competitors. A. Perceptual mapping B. One-to-one marketing C. Product differentiation D. Market segmentation Answer: C Product differentiation is a positioning strategy that some firms use to distinguish their products from those of competitors. 10. Which of the following is the least likely targeting strategy that Numi Tea would select to market their products? A. Undifferentiated targeting B. Concentrated targeting C. Multisegment targeting Answer: A Undifferentiated targeting strategy is a marketing approach that views the market as one big market with no individual segments and thus uses a single marketing mix. CASE ASSIGNMENT: Harley Davidson Long associated with biker culture, Harley Davidson evokes images of carefree, rebellious, even lawless riders wearing long beards and leather vests, cruising across the country while living by their own rules. The company’s typical customer is a white, 47-year-old man, and while Harley Davidson has an extremely loyal customer base, its brand has little cachet with people outside of this demographic. Such a limited (and rapidly aging) market does not bode well for the company’s future. In a bid to solidify its future, Harley Davidson is looking to expand its customer base. According to CEO Keith Wandell, the company aims to boost the number of riders and consumers outside of the company’s core customer group of white men over the age of 35 by marketing its motorcycles and accessories to women. This extended campaign consists of numerous programs, social events, Web sites, and design changes, all expressly aimed at making the Harley Davidson experience seem like an attractive and thrilling hobby for women. For example, the company hosts a series of garage parties throughout its nationwide network of dealers. The parties are a social gathering for women, where they can sip on wine and enjoy appetizers while motorcycle enthusiasts share about the thrills of riding a Harley. Even as it expands its customer base to a new market segment, Harley is taking care not to alienate its core male customer base or to dilute its rebellious image. To maintain its appeal to white, middle-aged riders, Harley recently introduced the three-wheel Ultra Classic Trike, which was designed to be easier to control for older people who may have a reduced sense of balance. In a similar vein, Harley’s marketing chief Mark-Hans Richer says "We're trying to be our thing to more people." Alexandra Straub, “Harley Party Helps Introduce Women to Bikes,” The Gazette, February 24, 2013, www.montrealgazette.com/Harley+party+helps+introduce+women+bikes/8009187/story.html (Accessed March 26, 2013); Barbara Vilacis, “Harley Celebrates Women Riders,” Ultimate Motorcycling, May 3, 2012, www.ultimatemotorcycling.com/2012/harley-celebrates-women-riders (Accessed March 26, 2013); Rich Rovito, “Harley-Davidson Launches Women Riders Month,” The Business Journal, May 4, 2012, www.bizjournals.com/milwaukee/blog/2012/05/harley-davidson-launches-women-riders.html (Accessed March 26, 2013). TRUE/FALSE 1. Harley Davidson’s new Ultra Classic Trike is part of a market. Answer: False A market is (1) people or organizations with (2) needs or wants and with (3) the ability and (4) the willingness to buy. 2. Garage parties and other forms of marketing aimed at women suggest that Harley Davidson has begun engaging in market segmentation. Answer: True 3. Based on the case, Harley Davidson has focused primarily on geographic segmentation. Answer: False Geographic segmentation refers to segmenting markets by region of a country or the world, market size, market density, or climate. 4. A satisficer would likely look up the closest Harley Davidson dealership and buy from there without visiting other dealerships in the area. Answer: True 5. Harley Davidson’s effort to expand its customer base by marketing its motorcycles and accessories to women is an example of repositioning. Answer: False Repositioning is changing consumers’ perceptions of a brand in relation to competing brands. MULTIPLE CHOICE 1. Which of the following is not a likely demographic factor of Harley Davidson’s traditional market? A. Middle-income. B. Caucasian. C. Married with children. D. Easygoing personality. E. All of these are demographic factors. Answer: D Personality is a psychographic factor. 2. Which of the following steps should Harley Davidson not have taken when segmenting its market? A. Choose a basis or bases for segmenting the market. B. Design, implement, and maintain appropriate marketing mixes. C. Profile and analyze segments. D. Select a market or product category for study. E. None of these are appropriate steps. Answer: E All of these are important steps to the segmentation of a market. 3. The average Harley Davidson rider is a member of which age segment? A. Teens. B. Generation Y. C. Generation X. D. Baby boomers. E. The silent generation. Answer: C Generation X is the group that was born after the baby boomers, between 1965 and 1978, and the average Harley Davidson rider is 47. 4. Harley Davidson’s Ultra Classic Trike has the potential to do this—to cut into the sales of the company’s existing motorcycle options: A. Reposition. B. Cannibalize. C. Optimize. D. Segment. E. Differentiate. Answer: B Cannibalization occurs when sales of a new product cut into sales of a firm’s existing products. 5. “Harley Davidson evokes images of carefree, rebellious, even lawless riders wearing long beards and leather vests, cruising across the country while living by their own rules.” This exemplifies the company’s: A. Position. B. Perceptual map. C. Benefit segmentation. D. Family life cycle. E. None of these. Answer: A Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings. GREAT IDEAS FOR TEACHING CHAPTER 8 James S. Cleveland, Sage College of Albany DISCUSSION BOARD TOPICS TO ENCOURAGE PARTICIPATION Discussion board questions provided to students to encourage them to engage in thinking and writing about the content of the Principles of Marketing course usually take the form of a provocative statement to which students are asked to respond. An example of this would be “All PR is good PR.” Discussion topics such as this one are abstract and often require that the instructor provide an initial reply to show students what is expected of them in their own replies. For students with limited work experience, this approach may be quite appropriate. For adult students with extensive experience as employees and consumers, however, the abstract nature of such topics can be frustrating. I have developed, therefore, a series of discussion board questions to use with experienced, adult students. These questions are designed to encourage them to use their experiences as employees and consumers as doorways to better understand the course material, and to make their own responses more interesting to themselves and to the other students in the class who will read and comment on them. Each question has three parts: 1. First, there is a sentence or two from the students’ textbook introducing the topic. By using the text author’s own words, students are enabled to locate relevant material in the text more easily, the text content is reinforced, and confusion resulting from use of variant terms or expressions is minimized. 2. Second, there is a reference to text pages the students should review before proceeding. Since the goal of the exercise is for students to apply the course content to their own experiences, reviewing the content first is important. 3. Third, there is a request for the students to think about or remember some specific situation in their experience to which they can apply the text material, and a question or questions for them to address in their replies. Here are additional such discussion board questions developed for Chapter 8 of MKTG10. Each is written to fit the same text cited above but could easily be rewritten and revised to fit another text. Series A 1. Marketers use segmentation bases, or variables, which are characteristics of individuals, groups, or organizations, to divide a total market into segments. 2. Review the five general segmentation bases in section 8-4 of your text. 3. Then describe what base or bases your employer uses to segment its market. Be as specific as you can. For example, a company selling women’s clothes is obviously segmented by gender but it probably also segments by age or profession as well. Series B 1. The development of any marketing mix depends on positioning, a process that influences potential customers’ overall perception of a brand, product line, or organization in general. Position is the place a product, brand, or group of products occupies in consumers’ minds relative to competing offering. 2. Review positioning in section 8-9 of your text. 3. Then describe the position of the products marketed by your employer. Do you think this is a good position? Why or why not? Barbara Coleman, Augusta College UNITY IN DIVERSITY Whenever I teach a unit on multiculturalism, I begin with the following exercise. Sometimes it uncovers interesting differences based on gender or ethnicity, but just as often it identifies common values and lifestyle characteristics. Note your race, ethnic group or country of origin: _____ Male _____ Female What is your favorite television program: radio station: leisure activity: food: drink: restaurant: What do you see yourself doing 5 years from now? What is your attitude toward marriage and children? After this form is completed, students discuss it in class. You may also use small group discussions first and then general class presentations or discussions. Marcel L. Berard, Community College of Rhode Island MARKETING STARTS WITH STP: SEGMENTING, TARGETING AND POSITIONING This project should be started at the beginning of the semester so as to provide students immediately with a target date for oral and written completion. It is highly recommended that this project start early and finish toward the end of the semester utilizing a team approach. Team members should not exceed five students to each group—two, three, or four are preferred. A professor may want to choose and assign students in particular groups, or students may choose members. Also, professors might provide class or library research time to complete the project, although most work will be completed out of class. A final note to the professor: Contingent on semester duration, the required marketing strategy project outline can be lengthened or shortened with no loss of importance to the marketing plan. Students’ Product Instructions and Outline (Students must choose only one topic below!!!) Marketing Strategy Project STP choice topics: #1 – New Musical Group #2 – New Feature Movie #3 – New Television Show Note to Students: Conduct a “Brainstorming” session in which your group chooses a topic from those listed above. In your session, you should answer all statements and questions in all three sections of the Marketing Strategy Project outline below. Good Luck!!! Marketing Strategy Project Outline Section #1. Segmenting Your Product Market a. Current product identification and information (name, location, size logo, symbols, insignias, models, etc.) b. Product’s philosophy, climate, and culture (mission statement) c. Short-term and long-term goals d. Demographics (age, sex, income, occupation, lifestyle factors, activities, interest, values, etc.) e. Present market size (where are your customers—percentage of market you want to capture—and why?) f. How to increase market share (describe your market growth potential) Section #2. Targeting Your Product Market a. Primary target market (main consuming group) Secondary target market (additional sales potential b. Product life cycle (describe anticipated adjustments in the marketing mix – changes through the stages) c. Supply five different and potential promotional vehicles d. Advertising detail schedules e. How are you going to generate publicity? Section #3. Positioning Your Product Market a. What is special about this product? b. List and describe its features and benefits. c. Explain the image and character you would like your customer to see. d. Describe and provide your three closest competitors’ activities. e. Analyze your product’s opportunities and threats in the market. Reminder: Marketing strategy starts with “STP”!!! Solution Manual for MKTG: Principles of Marketing Charles W. Lamb, Joe F. Hair, Carl McDaniel 9781305631823, 9781285860145, 9781337116800
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