Advertisings New Medium: Human Experience

Jeffrey F. Rayport

- Diageo: London-based beverage giant

o turned (Brazilian-market) whiskey bottles into a conduit for custom video
o scan a code --> upload a video for Dad/receive the recorded message for Fathers Day
o transformed the most mundane form of advertisinga label with a logo - into an open-ended personal
messaging system that could be woven into consumers lives
- Old advertising: ubiquitous, poorly targeted, intrusive, ignored/actively rejected
- Todays media-saturated world:
o consumers drowning in irrelevant messages (web, TV, radio, print, outdoor displays, mobile devices)
o pervasive screen displays
o media networks have infiltrated scores of out-of-home places in our daily lives (taxis, trains, buses, elevators,
filling stations, bars, restaurants, subways)
- Marketers must do the following:
o (1) rethink their advertising strategy and execution
o (2) expand their definition of what advertising is

Human experience
- a vast advertising medium that can and should be approached strategically

Be a Presence
- marketers must think less about what advertising says to its targets and more about what it does for them
o Advertising campaigns before: beginning --> middle --> end
o Today: advertising and its offerings as a sustained and rewarding presence in consumers lives
- Native content - both text and video that complement commercial messaging and encourage consumers to engage
with it because its more than an ad
o E.g. Demand Media, Skyword, BuzzFeed, Rolex, Fidelity
- Competing for attention by yelling louder is not a sustainable strategy (regardless of message)
- Advice: approach this medium as a landscape composed of four domains
o marketers have placed ads in these domains, but unwittingly or not strategically

Idea in Brief
- persuading through interruption and repetition is increasingly ineffective due to media saturation

Four Domains of Human Experience

(1) Public Sphere
- Definition: where we move from one place or activity to another, both online and off
- Typically engages consumers during moments of downtime when theyre moving between one point or activity and
the next and have attention free for new inputs
- Examples:
o Burma-Shave (1920s) erected sequential signs that delivered rhyming ad messages as drivers whizzed past
o Captivate Network put silent, sponsored screens in office tower elevators
o PumpTop TV put digital displays on gasoline pumps
- Virtual realm - marketers can buy online ad space and serve one of thousands of variations of an ad tailored to the
consumers profile and location (through real-time bidding and dynamic execution)
o will become less the intrusion theyre considered now and more a source of welcome messages
o mobile apps and services can reach consumers between activities or in transit, when people reflexively turn
to their devices
o consumers use mobile devices to seek relaxation or entertainment
- Principles of effective public sphere ads:
o relevant in context
- message aligns with the consumers experience at the moment he encounters the ad
- example: Zappos placed ads in the bins used to move possessions through US airport security to
connect the time in transit with unintrusive but relevant message
o help people reach personal objectives
- example: IKEA provides a water taxi and a branded shuttle bus to get from Manhattan and back and
makes it easy to reserve Zipcars in advance of or during a store visit
o buses, boats, and Zipcars as mobile billboards
o advertising conceived as problem solving
o branded interventions
- enter the lives of consumers in targeted and useful ways when and where theyre desired or needed
- example: Duracell dispatched Rapid Responded trucks into devastated areas after Hurricane Sandy
o provide engaging, refreshing, or compelling experiences
- examples:
o pop-up stores and pop-up trucks are surprising, experientially rich, and brand-focused
o Charmins temporary public restrooms with its products in Manhattan Times Square during
the holiday season to increase brand awareness and build goodwill
- Typically address a specific practical function, but can also influence the remaining three spheres
(2) Social Sphere
- Definition: where we interact with and relate to one another
- helps people forget new connections or enrich existing ones
- can turn social interactions themselves into carriers of ad messaging
- must appear in the right place at the right time with the right message (like public sphere)
o must be relevant in context, align with social goals, address a social need, and facilitate interaction in
innovative ways
- examples:
o Diageos talking bottles reinforce existing relationships while also reinforcing the brand (consumers are
inspired to pass the ad along)
o P&Gs Old Spice delighted friends, cemented connections, and boost the brand
o Walmarts Shopycat address social needs by finding the right present for a friend using semantic intelligence
o Nintendo fueled the highly successful launch of its Wii video games console by identifying women who fit the
young mom profile and providing them with everything they needed (game consoles, catering, event
management) to unleash a backyard fence-style word of mouth
- emphasizes broad, diverse networks

(3) Tribal Sphere

- Definition: where we affiliate with groups in order to express our identity
- more focused social engagement and marketers can use or help create consumers identification with groups
- Advertising that leverages on tribal affiliation must:
o suit the character and values of those involved
o address desires for identity, self-expression, and membership
o provide a social signal or status marker
o empower the individual
- Examples:
o Yelp (and similar online sites) is populated exclusively by user-generated reviews of offline ventures (ranging
from restaurants to cultural institutions) coming from the Elite Squad whose strong sense of affiliation makes
them powerful brand ambassadors who spread positive word of mouth about Yelp online and of
o Starbucks bolstered tribal identity by linking the online and offline worlds, awarding status markers to people
who have become mayors of individual Starbucks stores by virtue of their number of Four-square check-ins
- Not limited to the masses: luxury brands also use conventional mass media advertising and rely on their customers
to deliver the most powerful messaging of all
o Examples: Hermes, Gucci, and Louis Vuitton all depend on consumers desire to signal their social status (or
group affiliation) by showcasing logos and brand names

(4) Psychological Sphere

- Definition: where we connect language with specific thoughts and feelings
- domain of language, cognition, and emotion
o all advertising ultimately operates here in one way or another
- Ads are designed to insert words, phrases, or emotions into a consumers psychological processes
o shorthand for complex concepts, inspiring action or triggering positive feelings
- Principles of successful psychological sphere advertising:
o provide new ways to articulate ideas
o engender habit formation
o guide reasoning
o elicit emotion
- Four ways of operation:
o use language to establish a cognitive beachhead for a brand
o seek to create habits
o guide cognition
o connect a brand with a mood or an emotion

Online Ads in the Four Spheres

- Online advertising technologies enhance marketers ability to tailor advertising to a consumers specific context
- Several thousand variations of an ad for a standard online ad unit
o Dynamic execution - process by which marketers choose the version thats most likely to resonate with the
recipient
- happens in 30 to 120 million seconds, from the ad call (clicking on a link or typing in a URL) to the loading of the
webpage

Placing Ads in the Spheres

- Customer-centric rather than a media-centric approach
o Before: focusing first on which media to emphasize in a campaign
o Now: start by determining how the envisioned advertising can integrate into consumers lives in ways that
deliver value and win their trust
- Advertising in the spheres is designed to establish a sustained presence that ranges from branded utility to
instrument of thought
- Five steps for applying these ideas:
 o (1) Define objectives from a consumers, not an advertisers, point of view
- marketers often fail to clearly articulate their strategic goals at the outset
o (2) Target the campaign to create value for consumers
- Each sphere has its strengths
o choosing the sphere depends on where the consumers and the advertisers objectives
intersect
- Examples:
o Public sphere: awareness, trial, repurchase
o Tribal sphere: purchase, brand preference, loyalty
o (3) Test, listen, and adjust ads to improve the customer experience
- Dynamic testing is required because a variety of reasons may make an appropriate sphere ineffective
- Listen to the intended targets of a campaign with the technological and conventional tools
available and adjust course in real life
o (4) Evaluate an expansion strategy
- Advertising may be withdrawn from one sphere or extended into additional spheres
o (5) constantly look for ways to refresh the message
- Consumer attitudes and behaviors are evolving at an accelerating pace
o Gauge campaign performance and adapt approach in real time
- Important for the public sphere: messaging must play a useful, contextually appropriate, and value-
creating role in peoples daily lives
-
Conclusion
- Todays advertising is less interruptive but more constant compared to conventional advertising
- Abuse can change present and valuable into invasive and exploitative which will be rejected
o assault senses, invade privacy, seek inappropriately to extract value, and abuse consumers
- Get consumers permission and engage them
- Spheres-based advertising works only when it is welcome and useful

Marketing Promotions
Marta Wosinska

Marketing
- The process through which a firm creates value for its chosen customers by meeting those customers needs
o Pricing - way by which a firm can capture a portion of the created value
o Through marketing promotions, the consumer must:
- be aware of the products existence
- sufficiently value the product to choose it over competitive products, or to choose over not buying
- 6 Ms model for communications planning: (S-MMM I-MMM)
o Strategy
- market: to whom
- mission: objective
- message: specific points
o Implementation
- media: vehicles for execution
- money: how much to spend
- measurement: impact assessment

Understanding the Buying Process

- Begin with a careful analysis of the consumers decision-making process (DMP)
- Marketers ultimate goal: to have a consumer buy the firms product or service
o Valid communications goal: to move the customer from one step to the next
- Hierarchy of effects model: (C-UAK A-LPC B-PR)
o cognitive stage: unaware of product --> awareness --> knowledge
o affective stage: liking --> preference --> conviction
o behavioral stage: purchase --> repeat purchase
- No one model of the purchase process is universally applicable
o Level of involvement and hedonic dimensions of the product will change the hierarchy of effects through the
elimination, addition, or reversal of different stages
o Time between purchases can also affect relevance of repeat purchase (E.g. real estate)
o High stream of income (relative to any individual purchase) may lead to repurchase (E.g. prescription drugs,
household cleaning supplies)

4 Major Promotional Tools

- Large and ever-growing number of promotional vehicles
- Differences:
o Ability to obtain feedback
o Ability to control and customize the message

(1) Advertising
 - Definition: Paid placement of announcements and persuasive messages in time or space to inform and/or persuade
members of a particular target market or audience about a product, service, organization, or idea
- Distinguish among many tools, which differ on 2 dimensions:
o (1) level of feedback
- one-way messages/broadcast (example: TV)
- instantaneous feedback
o (2) customization
- broadcast reaches millions with the same message
- direct-mail ads can customize/personalize the message
- Change in the popularity of different media because of the following:
o New channels of communication due to technological innovation
o Saturation of traditional media (demand > supply)
- Effects:
o Increase in across-the-board competition for consumers attention
o Difficulty in breaking through the clutter

(2) Personal Selling

- Definition: A highly expensive yet flexible form of marketing communication
- Allows for:
o instantaneous feedback
o great customization potential
o an ability to account for complex decision-making unit and customer DMP structures
- Message flexibility comes at a cost
o Developing a qualified team of salespeople is costly and challenging
- A fixed resource in the short run

(3) Sales Promotions

- Channel partners play a key role in influencing consumers buying process
o fulfill demand
o assist in demand generation
o offer after-sales service
o provide market feedback that is indispensable for marketing strategy development
- Can be used to support or supplement channels in their marketing efforts on behalf of the products manufacturer
- Two main types:
o (1) consumer sales promotions
- Objectives:
o product trial
o repeat usage of product
o more frequent or multiple product purchases
o awareness of a new/improved product, new packaging, or different package size
o neutralizing competitive profitable line, or another product in the line
- Often take the form of coupons, free samples, rebates, or premiums
o Rebate: returns a portion of the purchase price to the buyer in the form of cash
o Premium: an item of value as an additional incentive to influence purchase
- Pull strategies - induce consumers to seek out specific products or brands from the retail
channels
o encompass advertising: also meant to get the consumer to demand the product at the point
of sale
o (2) trade promotions
- Financial incentives to the channel
- Objectives:
o gaining channels support to carry an item
o increase items visibility
o lower items price
- Trade cares about product margins and the speed at which the product moves off its shelves
- Either directly increase retail margins or are passed through to consumers in the form of temporary
price discounts, coupons, or placement in feature advertising in local Sunday newspapers
o If passed onto consumers: retailer benefits through an increased rate at which the product
moves off the shelves
- Push strategies - help the manufacturer push products through the channel
- Forms:
o discounts
o slotting allowance fees (cover various costs)
o cooperative advertising
o special displays

(4) Indirect Forms of Promotion

- Third parties (other than channels) also affect the consumer DMP
- Communications received from other customers, experts, or media sources
 o either minimally reimbursed for their effort or are unpaid (not aware of their promotional role)
- Their real or perceived impartiality can enhance the credibility of the message
- Potentially powerful and inexpensive
- Limited control over the timing and the message associated with the intervention
o E.g. Companies have no control over how products will appear in product placements
o negative associations may destroy desired outcome
- Marketer can influence coverage of its product by making information available through press releases or test-use
o Public relations - builds good relations with the firms various publics by obtaining favorable publicity,
building up a good corporate image, and handling or heading off unfavorable rumors, stories, or events
o The most challenging is identifying influential consumers to tap into word-of-mouth dynamics

Integrated Marketing Promotions

- Two crucial components of an integrated marketing campaign:
o Mapping the consumer DMP to the selling process
o Considering the internal consistency of ones promotional tools

(1) Map the Buying and Selling Processes

- Opportunity to analyze each stage in isolation and to explore what makes the customer move from one stage to the
next
o can be used to map a full strategy
o E.g. M&Ms Crunchy (unaware --> aware --> positive attitude --> trial --> repeat)
- spot on the Super Bowl for awareness and positive attitude
- retail distribution and special retail displays and promotions (before advertising) for trial
- Consumer insight gained from a DMP analysis can suggest which media are most appropriate
o Added advantage: more distinctive than traditional media
o Disadvantage: the novelty and lack of clutter will wear off, thereby decreasing their effectiveness
- Research on the consumer buying process does not necessarily lead to the use of nontraditional media
o E.g. Emerald used highly entertaining mnemonics on 15-second TV ads just to get the name out and create a
strong brand linkage

(2) Consider the Consistency

- Every promotional tool conveys a message, whether intended or not
o interaction of messages ultimately affects overall effectiveness of marketing promotions
- Message consistency goes beyond the marketing mix
o totality of messages in the promotional mix (pricing, product promise, customers experience) contribute to
how existing and potential customers perceive the product or service
- Need for consistency across promotional messages directed toward a given consumer segment
o Be aware of conflicts in promotional messages if they will be shown to the same segment
o Solution: keep a consistent overall positioning for a product as it is presented in mass media, then customize
the message for media that do not overlap
- E.g. Volkswagen does not feature people in New Beetle ads to avoid association

Economics and ROI

- Two other considerations:
o How much to spend (money)
o Whether this spending pays off (measurement)

(1) Sizing the Budget

- Size of marketing promotions budget
o Simple rules of thumb (reality checks):
- Budget as a percentage of expected or previous years sales
- Competitively based benchmark - pend to have a share equal to the products share-of-market
o objective and task method - Figure out what you have to do to attain your objectives and cost it out
- Sllocation of the budget is complicated by different parts of the organization which control parts of the promotional
mix
o E.g. marketing, sales, and customer service are diferent departments with separate budgets and diferent
objectives
o Consumer DMP must be considered in its totality to avoid poorly integrated promotional strategies
o Two overriding principles:
- The need to affect the various stages of the DMP should drive budget allocation
o which stages have a high throughput? where does the DMP stop for a large share of
consumers?
- Effectiveness of various tools vary, and the firm should choose the one that yields the highest impact
per dollar spent

(2) Measuring Effectiveness

- Important part: Building in a mechanism for learning from previous efforts
o Critical input to decisions about future spending levels, allocation of the budget across media, and specific
communication messages
 o average tenure of a CMO: 22 months (due to inability to demonstrate the promotions results)
- First step: Clearly stating the objectives at the onset of a promotion
o Examples:
- Do market research for awareness or behavioral objectives
- Look at company records for sales objectives
- The markets dynamic nature can make before-and-after comparisons unreliable
o Examples:
- new competitors (like Pfizers Lipitor vs. Zocor)
- economic recession can increase price sensitivity
- Importance of continual feedback about effectiveness calls for the development of marketing research competencies
in-house
o Experimentation can work well with customer relationship management, which provides information that can
be used to test promotional tools

Rehumanizing Marketing (and Consumer Behavior)

Ben Wooliscroft

- Francis Bacon: words, as a Tartars bow, do shoot back upon the understanding of the wisest, and mightily
entangle and pervert the judgment.
- Words and phrases accurately reflect that which we study and that interests us
o Can blind us to important issues
o Have the potential to upset or alienate people
- We should examine the words we use
o If not: those words will alter our understanding of the phenomena that we study, without our awareness
- Marketing scholars have considered discourse, but not critical discourse analysis
o Critical discourse analysis: presupposes a study of the relations between discourse, power, dominance,
social inequality and the position of the discourse analyst in such social relationships (Van Dijk)
o Discourse analysis: what we say, but not the words we say it with
o concern on the vernacular and mass media use of marketing- generally used by uneducated members
of the population, to mean unethical people selling substandard goods at inflated prices or misleading
advertising
- Language impacts the people described and how we treat them
o Research has considered the impact of labels on people (examples: psychological issues, serious medical
diagnoses, ethnic groups)
o Extreme: n word, now acceptable amongst rap and hip hop singers (from an out-group label into an in-
group identifier)
- Marketers should reflect on how the terminology we use impacts on our approach to the study of market phenomena
o Complete lack of people in marketing and consumer textbooks, popular business press, and academic
writing

Why are there no people in marketing?

- Dehumanizing technology has distanced business research from people, as if there are no people in a marketing
textbook, merely consumers or firms
- American Marketing Association defines marketing as the activity [undertaken by people], set of institutions [made
up of people], and processes [that people do] for creating [by people], communicating [through people], delivering
[via people], and exchanging [between people] offering that have value for customers [people who buy those
offerings as end users], clients [people who owned them before the end user], partners [people we work with], and
society at large [all people]
o Implied reference to the people in it
o Marketing as a study of people and their behavior centered around exchange and consumption activities
o Though the definition implies people throughout, the terms used are dehumanizing and influence our
understanding of the phenomena under study
- Research into consumption is concerned with buyer behavior and consumer behavior
o states what we are interested in and what we are not interested in
- Interested in: buyers and consumers
- Not interested in: non-buyers and non-consumers, experience of buyers and consumers outside their
role as buyers and consumers
o Dismisses the rich variety of the human condition
- Parallelism: finance sees investors, not grandparents/parents/people who want to put their money
somewhere safe
o Consumption and investment are not sufficiently important parts of our lives to define us, but it is all
marketing and consumer researchers appear to care about when studying people

We are researching consumer behavior, not human behavior

- The label consumer implies that his purpose is consumption, not quality of life, education, education, social
contact, or love

Firm research
- the firm is a collection of people
- Forms are rational decision makers, ignoring the fact that firms are made up of people
 o these people are as fallible as members of any human group
- The firm is an anonymizing noun to avoid stating which people in the firm made the decisions, or on whose authority
they were made
o Responsibility disappears into the firm
o Language used in media: only following orders
- Firms are represented as being free of people
o people being studied are subjects, informants, or respondents
o responses are turned into data
- Dehumanization is likely driven by science envy
o but the strength of social sciences is that they are social, they relate to people and human behavior
o danger of pursuing a hard science approach: dismal science

Putting people back into marketing and consumer behavior

- Words we used have delimited the areas that we pay attention to when studying market phenomena
- Alderson: people are both producers (members of firms) and consumers (members of families)
o he was close, but it was not explicit
- Putting people back into consumption-related behavior and firms (owned, managed, represented by people)
o most human phenomenon
o first step to remind ourselves that we are dealing with people
o consumption assists peoples quality of life, but it is not the center of peoples lives

Rethinking Marketing
Roland T. Rust, Christine Moorman, and Gaurav Bhalla

Stuck in the1960s
- 1960s as the era of mass markets, mass media, and impersonal transactions
o Measurement: Aggregate sales and profitability
o The irony: These firms have powerful technologies to directly interact with customers and to collect
information about them
- Customers expect to interact more deeply with companies to shape the products and services they
use
- Companies must shift their focus from driving transactions maximizing customer lifetime value (CLV)

Cultivating Customers
- Today, there are more options for companies
- Traditional v. Customer-cultivating company
o Traditional companies are organized to push products and brands
o Customer-cultivating companies are designed to serve customers and customer segments, and
communication is two-way and individualized
- B2B Companies (Business to Business)
o Use key account managers and global account directors to focus on meeting customers evolving needs,
rather than selling specific products
- B2C Companies (Business to Consumer)
o View their customer relationships as evolving over time, and they may hand off customers to different parts
of the organization selling different brands as their needs change

Reinventing Marketing
- Boards and C-suites mostly pay lip service to customer relationships while focusing intently on selling goods and
services
o The need for a strategy shift from transactions to relationships
o The need to create the culture, structure, and incentives necessary to execute the strategy
- Reinvention of the marketing department A customer department
o The CCO or Chief Customer Office (formerly CMO)
A powerful operation position, reporting to the CEO
designs and executes the firms customer relationship strategy
oversees all customer-facing functions
Successful CCO: promotes a customer-centric culture and removes obstacles to the flow of customer
information throughout the organization
Must create incentives that eliminate counterproductive mindsets
Accountable for increasing the profitability of the firms customers, as measured by metrics such as
customer lifetime value (CLV) and customer equity, and intermediate indicators (E.g. Word of mouth
or mouse)
o Customer (and segment) managers
Identifies customers product needs
o brand managers (under customer managers) supply the products to fulfill those needs
Requires shifting resources and authority from product managers customer managers
o Product managers should focus on helping customer and segment managers maximize
their profits (instead of their products or brands)
o Customer-facing functions
 The customer department assumes responsibility for some of the customer-focused functions that
have left the marketing department in recent years
Customer relationship management (CRM)
o increasingly taken on by companies IT groups because of its technical capability
requirements
o A tool for gauging customer needs and behaviors, which is the central role of the new
customer department
o must be brought into the customer department (along with IT and analytic skills)
Market research
o Internal users of market research extend beyond the marketing department to all areas of the
organization that touch customers
- finance: source of customer payment options
- distribution: source of delivery timing and service
o Scope of analysis shifts from an aggregate view an individual view of customer activities
and value
o shifts its attention to acquiring the customer input that will drive improvements in customer-
focused metrics (examples: CLV, customer equity)
Research and Development (R&D)
o A product should be more about customer needs, not clever engineering
- otherwise, sales will suffer
- example: feature fatigue from packing lots of features into products
o Customers should be brought into the design process through integrating R&D and marketing
o Customer Service
It should be handled in-house, under the customer departments wing
o to ensure high quality of service
o to help cultivate long-term relationships

Building Relationships
- (1) product-manager driven
o product managers
o one-way mass marketing to push a product to many customers
- (2) customer-manager driven
o customer managers who engage individual customers or narrow segments
o two-way communication
o building long-term relationships by promoting whichever of the companys products the customer would
value most at any given time

What Makes a Customer Manager?

- The ultimate expression of marketing (find out what the customer wants and fulfill the need)
o Product manager: traditional selling mind-set (have product, find customer)
- Broader and more integrative view of the customer
- Broad training in the social sciences (psychology, anthropology, sociology, economics) and marketing
- Shift emphasis from marketing products cultivating customers

A New Focus on Customer Metrics

- New metrics to gauge the strategys effectiveness (due to the shift from marketing products to cultivating customers)
o (1) Product profitability Customer profitability
o (2) Current sales CLV
CLV evaluates the future profits generated from a customer, properly discounted to reflect the time
value of money
o focuses the company on long-term health
o (3) Brand equity (value of a brand) Customer equity (sum of the lifetime values of customers)
Brand equity - just a means to an end (customer equity)
Added benefit of Customer equity - a good proxy for the value of the firm, thus making marketing
more relevant to shareholder value
o (4)Current market share Customer equity share (companys customer base divided by total value of
customers in the market)
Market share - snapshot of the companys competitive sales position at the moment
Customer equity share - measure of the firms long-term competitiveness with respect to
profitability
- Need for companies to be more adept at tracking information at several levels (individual, segment, aggregate)
o (1) individual level
key metric: CLV
marketing activities tracked: direct marketing activities
key data sources: customer databases compiled by the firm
o (2) segment level
key metric: lifetime value of the segment (lifetime value of average customer times number of
customers in the segment)
 marketing activities tracked: marketing efforts targeted at specific customer segments, sometimes
using niche media
key data sources: customer panels and survey data
o (3) aggregate level
key metric: customer equity
marketing activities tracked: mass marketing efforts, often through mass media
key data sources: aggregate sales data and survey data
- Companies need metrics for evaluating progress in collecting and using customer information

Conclusion
- Shifting from product-focused to customer-centric will be difficult
o IT department will want to hang on to CRM
o R&D will want its relative autonomy
o traditional marketing executives will battle for their jobs
- It wont happen organically because it requires overcoming entrenched interests
o Transformation must be top down
- Shift is inevitable: only competitive way to serve customers

Market Segmentation, Target Market Selection, and Positioning

Miklos Salvary and Anita Elberse

Stages in the marketing process (according to Note on Marketing Strategy)

- Marketing analysis
- Market segmentation
- Target market selection
- Positioning
- These steps are the prerequisites for designing a successful marketing strategy

Market Segmentation
- Consists of dividing the market into groups of (potential) customers (called market segments) with distinct
characteristics, behaviors, or needs
- Aim: to cluster customers in groups that clearly differ from one another but show a great deal of homogeneity within
the group
- allows segments to be served more effectively and efficiently with products that match their needs (compared with a
large, heterogenous market)
- Important things to remember:
o Segments must be sufficiently different from one another
o Segmentation must be based on one or more customer characteristics relevant to the firms marketing effort
o A thorough analysis of the customers is essential
- Two (related) types of segmentation:
o Segmentation based on benefits sought by customers
- ideal: segment customers based on their needs
o Segmentation based on observable characteristics of customers
- Practice: marketers segment based on demographics (gender, age, income), geographic location,
lifestyles, behavioral characteristics (usage occasions)
- easy to identify and address with a marketing message
- works only to the extent that it is correlated with benefit segments
- Requires a bit of experience and creativity
- Complication: there can be multiple acceptable benefit segmentation schemes
- A satisfactory, actionable market segmentation requires multiple iterations and informed compromises from the
marketer

Target Market Selection

- Involves evaluating each market segments attractiveness and selecting one or more of the market segments to
enter: what market segments the firm wants to serve and how
- The key to target market selection is understanding differentiation
- The process starts by collecting data for each firm in five areas: (2MDFP)
o (1) ability to conceive and design
- competitors R&D capability
- existing patents and copyrights
- access to new technologies through third parties
o (2) ability to produce (quality and quantity)
- competitors production technology and capacity
- flexibility
o (3) ability to market
o (4) ability to finance
o (5) ability to manage/execute
- Competitor capability matrices: synthesis of collected data
o Rows: detailed items of the evaluation areas (if too many, list only critical success factors in the product
category)
 o Columns: relevant firms (firm itself and competitors)
o Entry: rating of the competitor on the item corresponding to the entry
o allows marketers to recognize patterns in the competitive environment and identify the segment/s where his
firm is likely to be the strongest player
- Differential advantage analysis facilitates target market selection by pointing out the relatives strengths (and
weaknesses) of the focal firm
o does not predict the competitive reactions the firm might face if it indeed decides to target a segment
o a careful analysis of competitors overall corporate strategies and their reputation or history is needed to
predict such competitive reactions

Positioning
- The marketers effort to identify a unique selling proposition for the product
- Arranging for a product to occupy a clear, distinctive, and attractive position relative to competing products in the
minds of target consumers: reflects a competitive differentiation (goes beyond product benefits)
- should answer three questions:
o who are the customers?
o what is the set of needs that the product fulfills?
o why is the product the best option to satisfy those needs?
- considerations for each potential segment:
o how the firm would approach serving each segment
o how the firm wants to be perceived by those customers
- answers should be based on:
o thorough understanding of the customer
o competitive environment
o company itself
o conditions of the market in which it operates
- The positioning statement
o specifies the place the firm wishes to occupy in the target customers minds
o Our (product/brand) is (single most important claim) among all (competitive frame) because (single most
important support).
o primarily directed to potential customers
o guides the development of the marketing plan: solving the positioning problem enables a company to solve
its marketing-mix problem
o The organizing force among the marketing-mix elements to ensure their synergy

Differentiation
- Positioning at needs already sufficiently served by competitors will lead to:
o intense price competition
o no profit for the firm
- Two extreme types of differentiation:
o (1) Vertical differentiation
- All buyers agree that product A is better than product B
- at the same price, nobody will buy product B
- takes advantage of consumers differences in their willingness to pay for quality
- all customers (and potential customers) agree on the relevant dimensions of product quality
- should position products to customers with a specific level of willingness to pay for quality that is not
sufficiently served by a competitor
o (2) Horizontal differentiation
- Products A and B differ in ways independent of buyers overall judgments about their quality levels
- At the same price, some will buy product A and some will buy product B
- positioning strategy uses the fact that consumers differ in their tastes
- should identify the group/s whose need/s are not sufficiently served by a competitor
- Marketers can differentiate their products both horizontally and vertically
o Creativity and marketing expertise have an important role
o Marketers may discover or create a set of needs among customers not yet served or tap into a market
segment previously not regarded as a viable group of customers to serve
- Any element of the marketing mix (Product, Price, Place, Promotion) can be the primary instrument of differentiation
The Role of Brands
- Positioning and brands are linked
o Brands were introduced into the consumers language to make product differentiation concrete
o Brands are assertions that their offering is not like those of their competitors
- may be promises or pledges about attributes of the product
o A brand can assert that it is the category
- Highest goal of a brand builder: to have the noun he has imposed on the language displace the
natural language word (examples: Kleenex, Xerox, FedEx)
o But not all brands come to mean what the marketers have intended
- many brands struggle to denote anything that the consumer finds worthy of notice