The process of segmenting and targeting connects marketing actions to Identification of marketing needs

Identify MarketNeeds

ExecuteMarketingProgram

Steps in Segmenting & Target 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

Market product grid showing Reebok reaches customers with different needs

GENERALGROUP W/

NEEDRUNNING

(1981)AEROBIC

(1982)TENNIS (1984)

BASKETBALL (1984)

CHILDREN'S (1984)

WALKING (1986)

CROSS-TRAINERS

(1988)STEP-TRAINERS

(1991)

Runners P PAerobic Dancers P P

Tennis Players P PBasketball Players P P

Step Exercisers S PComfort & Style Conscious S S S S S S

Walkers S S S S P P

Children P

Perfo

rman

ce-c

onsc

ious

co

nsum

ers

(ath

lete

s)

Fash

ion-

cons

ciou

s co

nsum

ers

(non

athl

etes

)

Key: P = Primary Market; S = Secondary Market

MARKET SEGMENT PRODUCT (Kind of Shoes)

Advertising actions to reach specific student segments

Markets Lunch

Between Meal

Snacks Dinner

After-Dinner Snacks

Dormitory Students S L 0 LApartment Students L L S SDay Commuter Students L M S ONight Commuter Students 0 S L M

PRODUCTS: MEALS

Ads in buses: flyers under windshield wipers of cars in parking lots

Ad campaign: “Ten percent off all purchases between 2-4:30PM during winter quarter

Ad on flyer under windshield wipers of cars in night parking lots: “Free Frosty with this coupon when you buy a hamburger with fries.

Selecting a target market for your fast-food restaurant next to metropolitan college. Target market is shaded.

Markets Breakfast Lunch

Between Meal

Snacks Dinner

After-Dinner Snacks

STUDENTSDormitory 0 S L 0 LApartment S L L S SDay Commuter 0 L M S ONight Commuter 0 0 S L M

NON-STUDENTSFaculty or staff 0 L S S 0Live in area 0 S M M SWork in area S L 0 S 0

Key: L, Large Market; M, Medium Market; S, Small Market; 0, No Market

PRODUCTS: MEALS

Market-product grid showing size of markets for pillows for three different segments of sleepers

MARKETSOFT

PILLOWMEDIUM PILLOW

FIRM PILLOW

Stomache Sleepers L M SBack Sleepers M L MSide Sleepers S M L

Key: L, Large Market; M, Medium Market; S, Small Market

Market Segmentation

1. Def. Classification of prospective buyers into homogeneous groups from the twofold perspective of:

a) Common needs

b) Common response to marketing actions

2. Classification of Consumer Markets

a) Homogeneous

b) Diffused

c) Clusters

3. Criteria for Segmenting Consumer Markets

a) Geographic

b) Demographic

c) Psychological

d) Behavioral

- Occasions

- Benefits sought

e) User Status

f) Usage Rate

g) Loyalty Status

h) Attitude

4. Market Coverage Strategies

a) Undifferentiated Marketing

b) Differentiated Marketing

c) Concentrated Marketing

5. Seven Criteria For Selecting A Marketing Strategy

a) Company Resources

b) Product Homogeneity

c) Product Stage in Life Cycle

d) Market Homogeneity

e) Competitive Marketing Strategies

f) Feasibility of Marketing Programs

g) Profits

PositioningDef. All of the organization’s actions associated with

designing a product and creating an image so that it occupies a unique place in the customer’s mind, vis-à-vis competitive products. Should be sustained and profitable.

Six Positioning Strategies:1) Attribute2) Use3) User4) Product Class5) Competitors6) Price and Quality

Attribute SegmentationToothpaste Marketing Segments

ATTRIBUTES ChildrenTeens-Young

Adults Family Adults

Flavor XColor XWhiteness XFresh Breath XDecay Prevention XPlaque Removal XStain Removal XGingivitis X XPrice X

Brands Aim, Stripe

Ultra Brite, McCleans, Pearl

Drops, RembrandtColgate, Crest,

Total

Topol, Mentadent, Total,

Rembrandt

Branding1. Five Options:

a) Multi-Product Branding

b) Multi-Mix Branding

c) Multi-Branding

d) Private-Branding

e) Co-Branding

2. Growth Strategies

a) Line Extensions

b) Brand Extension

c) Flanker Brand Extension

d) Fighting Brand

Product DifferentiationProduct Services Personnel Channel• Insert Ordering Ease Competence Coverage

• Features Delivery Courtesy Expertise

• Performance Installation Credibility Performance

• Durability Customer Training Reliability

• Reliability Customer Consulting Responsiveness

• Repairability Maintenance/Repair Communication

• Style Misc.

• Design IMAGE

• Symbols

• Media

• Atmosphere

• Events

I. Product1. Form: Size, Shape, Physical structure of product.

Ex. Aspirin; Dosage, Size, Shape, Coating, Action time, Etc.2. Features:

-Co. Cost vs. Customer Value- Bundles or packages vs. Simple Add-Ons

3. Quality- SPI finds: ROI = +f(quality)- Promotes customer loyalty

Ex: Schlltz: increase SR cut aging time,used less expensive hopsResult: SR ¶ increases, Stock price increases, but LR market share decreases &

so did ¶ & stock prices4. Durability:

Generally advantageousException: Products subject to fast technologyObsolescence (e.g., Computers, Video cameras)

5. Repaiability:- Before GE sends a repair person, they try to fix it over the phone- Cisco Systems eliminated 50,000 calls a month by posting solutions

on its Web Site to frequently asked questions (FAQ)

6. Style-Eye-catching or Yawn producing

Ex. Apple computers; Montblanc Pens, Godiva chocolate, H-D, Arizona ice tea bottle

7. Design- The totality of features that affect how the product looks &

performs.Ex. Apple’s IMAC

- One button internet access- No clunky tower or desktop hard drive- No floppy disk drive

Global Trade:- Italians: Apparel, Furniture- Scandinavians: Design for functionality, aesthetics, environment- e.g., Braun ( a division of Gillette), Shavers, Coffeemakers, Hair

dryers, Food processors

II. Services

1. Ordering EASEEx. Internet Food Service Firms

Peapod

Streamline

Net Grocer

Cyber-meals

2. Maintenance/Repair

Ex. Tandem computers

Makes parallel CPUs

Uses remote diagnostics to monitor & walks the customer over the phone as to needed replacement parts & repair

3. Misc.Improved warranty or maintenance contract.

III. Personal Diff.

– McD’s: Courteous staff (Prior to 1995)– IBM: Professionals– Disney: Upbeat

Ex. GE, Frito-Lay, Cisco, Pfizer have excellent sales staff

IV. ChannelEx. • Catepillar: Construction Equipment

• More dalers than its competitors & in good locations• Well trained

• Dell & Avon• Direct marketing channels

Lams Pet Food– Ignored traditional channels (large chains) and went to

regional vets, breeders and pet stores– Sales 1982 1996

16M 500M

V. IMAGE: Customer perception of product or co.Ex. Nike: A shoe is an attribute

Airwalk: Extreme sports, Image to kidsSymbols:

• Apple• Lion (Harris Bank)• Passion (E. Taylor)• Uninhibited (Cher)• Blue (IBM)• Yellow (Kodak)• Red (Campbell Soup)

Media: Chosen image has to be worked into Ads, news reports, brochures, annual reports, bus. cards, etc

Atmosphere: Physical spaces occupied by a company• Hyatt Regency: Atrium lobbies• Bank Buildings must convey an image of safety

Events: Sponsorship• AT&T and IBM: sponsor symphony performance and art exhibits• Heinz gives money to hospitals• Kraft donates to MADD

Stages of Competitive Cycle

Sole Supplier

Competitive

Entry

Share Stability

Commodity

Competition

Withdrawal

Market Share

Production Costs

Price Premium