BASIC MARKETING

Chapter 4
Focusing Marketing
Strategy with
Segmentation and
Positioning

For use only with Perreault/Cannon/ McCarthy texts, 2011 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

At the end of this presentation, you should

be able to:
1. Know about defining generic markets and productmarkets.
2. Know what market segmentation is and how to
segment product-markets into submarkets.
3. Know three approaches to market-oriented strategy
planning.
4. Know dimensions that may be useful for segmenting
markets.

At the end of this presentation, you should

be able to:
5. Know a seven-step approach to market segmentation
that you can do yourself.
6. Know what positioning is and why it is useful.
7. Understand the important new terms.

Search for Opportunities can Begin by

Understanding Markets
What
What is
is aa
companys
companys
market?
market? aa group
group of
of

potential
potential customers
customers with
with
similar
needs
who
are
similar needs who are
willing
willing to
to exchange
exchange
something
of
something of value
value with
with
sellers
offering
various
sellers offering various goods
goods
or
services
or services

Generic
Generic markets
markets
(broadly
(broadly similar
similar needs
needs &&
offer
offer diverse
diverse ways
ways to
to
satisfy
satisfy needs)
needs) to
to

product
product markets
markets
(very
(very similar
similar needs
needs && offer
offer
various
close
substitutes)
various close substitutes)

Dont
Dont just
just focus
focus
on
on the
the product
product
The
The product
product oriented
oriented
approach
ignores
approach ignores
customers
customers;; Customers
Customers
make
make aa market!
market!

Broaden
Broaden market
market
definitions
definitions to
to
find
find
opportunities
opportunities
(generic
(generic and
and
product
product market)
market)

Taking
Advantage of
Opportunities

Relationship Between Generic and ProductMarket Definitions

Customer
Customer user
user
Needs
Needs

(met
(met by
by the
the product)
product)

Generic
Generic
market
market
definition
definition

Customer
Customer types
types

(who
(who uses
uses product)
product)

Geographic
Geographic area
area

((where
where market
market is
is located)
located)
Product
Product type
type
(good
(good and/or
and/or service)
service)

Product
Product
market
market
definition
definition

Interactive Exercise: Product-Market

Definition

What is Product-Market?

2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmentation is a Two-Step Process

Naming
Naming broad
broad
product-markets
product-markets

Disaggregating--break
Disaggregating--break apart
apart all
all
possible
possible needs
needs into
into some
some
generic
generic markets
markets and
and broad
broad
product-markets
product-markets in
in which
which the
the
firm
firm may
may be
be able
able to
to profitably
profitably
operate.
operate.

and
and

Segmenting
Segmenting
markets
markets to
to
selecting
selecting target
target
markets
markets and
and
develop
develop marketing
marketing
mixes
mixes

aa relatively
relatively homogeneous
homogeneous group
group
of
of consumers
consumers who
who will
will respond
respond to
to aa
marketing
marketing mix
mix in
in aa similar
similar way.
way.

Marketers Need Information about

Competitors
All customer needs
Some generic market
One broad
product-market
Homogeneous
(narrow) productmarkets
Single
target
market

Multiple
target
markets

Combined
target
markets

Narrowing
down to
specific
product-market

Segmenting
into possible
target markets
Selecting target
marketing
approach

Market Segmentation Defines Possible

Target Markets

Broad product-market (or generic market) name goes

here (The bicycle-riders product-market)
Submarket 1
(Exercisers)
Submarket 2
(Off-road
adventurers)

Submarket 3
(Transportation riders)

Submarket 4
(Socializers)

Submarket 5
(Environmentalists)

How Far Should the Aggregating Go?

Status dimension

A. Product-market showing
B.
three
six segments
segments

Dependability dimension

Three Ways to Develop Market-Oriented

Strategies
Single Target Market Approach
select one homogeneous segment as the target

Multiple Target Market Approach

select two or more target segments
develop a different marketing mix for each segment

Combined Target Market Approach

combine submarkets into a single target market
develop one marketing mix for the combined target

Segmenters and Combiners Aim at Specific

Target Markets
A segmenter
develops a
different
marketing
mix for each
segment.

Single target
market approach

Multiple target
market approach

A combiner aims at two or

more submarkets with the
same marketing mix.

The
Strategy

Strategy two
Strategy
one

The
strategy

Strategy three

UNSEGMENTED MARKET STRATEGY WITH A

SINGLE MARKETING MIX
COMMUNITY WRITING COMPANY

MARKETING MIX

VIEW OF MARKET

LEAD PENCIL
79 CENTS
TELEVISION
EXTENSIVE
DISTRIBUTION

ALL POTENTIAL
USERS OF A WRITING
INSTRUMENT

15

SEGMENTED MARKETING STRATEGY

WITH MULTIPLE MARKETING MIXES
MARKETING MIXES
FELT-TIP PEN
$1.00
CAMPUS NEWSPARER
VENDING MACHINES

VIEW OF MARKET
SEGMENT A
(STUDENTS)

FELT-TIP PEN
49 CENTS
PERSONAL SELLING
DIRECT FROM FACTORY

SEGMENT B
(PROFESSORS)

GOLD INK PEN

$50.00
MAGAZINES
DEPARTMENT STORES

SEGMENT C
(EXECUTIVES)

16

A SEGMENTED MARKETING STRATEGY

WITH SINGLE MARKETING MIX
MARKETING MIX

VIEW OF MARKET

SEGMENT A
(PROFESSORS)
FELT-TIP PEN
$1.00
CAMPUS NEWSPARER
VENDING MACHINES

SEGMENT A
(STUDENTS)

SEGMENT C
(EXECUTIVES)

Segmenting vs. Combining

Combiners
Combiners Try
Try
to
to Satisfy
Satisfy
Pretty
Pretty Well
Well
(Try
(Try to
to
increase
increase
market
market size)
size)
Profit
Profit Is
Is the
the
Balancing
Balancing Point
Point

Too
Too Much
Much
Combining
Combining Is
Is
Risky
Risky (innovative
(innovative

segmenter
segmenter may
may chip
chip
away)
away)

Segmenters
Segmenters Try
Try to
to
Satisfy
Satisfy Very
Very Well
Well

(develop
(develop marketing
marketing mix
mix for
for
each
each segment)
segment)

Key
Key Issues
Issues
Segmenting
Segmenting May
May
Produce
Produce Bigger
Bigger
Sales
Sales

(dictates
(dictates how
how
specialized
specialized aa
marketing
marketing mix
mix can
can be)
be)

Segment
Segment or
or Combine?
Combine?
((based
based on
on the
the firms
firms resources;
resources;

competition
competition in
in various
various segments;
segments;
similarity
similarity of
of customer
customer needs,
needs,
attitudes,
attitudes, buying
buying behavior)
behavior)

(consumers
(consumers are
are willing
willing to
to
pay
pay more
more in
in order
order to
to
satisfy
satisfy their
their needs
needs more
more
precisely)
precisely)

Checking Your Knowledge

A neighborhood restaurant in a diverse market area sought to
appeal to a wide range of consumers by offering a menu with a
few choices from each of several different styles of cuisine
American, Italian, Chinese, German, Thai, and Indian.
Recently, the restaurant has lost sales to newer restaurants
that offer many choices from a single style of cuisine. This
example illustrates the danger of adopting a _______________
approach.
A. Single target market
B. Multiple target market
C. Combined target market
D. Structured target market
E. Mixed-mode market

What Dimensions are used to Segment

Markets?
Qualifying
Qualifying
Dimensions
Dimensions
Relevant to
including a
customer type in a
product-market
Help identify core
benefits

Determining
Determining
Dimensions
Dimensions

OR

Affect the
customers
purchase of a
product or brand
Can be further
segmented

QUALIFYING DIMENSIONS FOR A

PROSPECTIVE CAR BUYER
MONEY OR CREDIT
DRIVERS LICENSE
NEED
JOB THAT REQUIRES
A CAR
CHILDREN
ETC.

21

DETERMINING DIMENSIONS
FOR THE CAR
STYLE
PERFORMANCE
APPEARANCE
SAFETY
ETC.

Behavioral dimensions for segmenting

consumer markets
Information
Information
required
required (lot
(lot
vs.
vs. limited)
limited)
Type
Type of
of problem
problem
solving
solving
(approaches)
(approaches)

Kind
Kind of
of shopping
shopping
(comparison
(comparison or
or
convenience)
convenience)

Needs
Needs (e.g.,
(e.g.,
economic;
economic;
functional)
functional)

Behavioral
Behavioral
Segmenting
Segmenting
Dimensions
Dimensions

Brand
Brand familiarity
familiarity
(insisting;
(insisting; nonnonrecognition)
recognition)

Benefits
Benefits
Sought
Sought (e.g.,
(e.g.,
gas
gas mileage)
mileage)
Thoughts
Thoughts (e.g.,
(e.g.,
beliefs
beliefs about
about aa
brand)
brand)

Rate
Rate of
of use
use
(e.g.,
(e.g., heavy,
heavy,
medium,
medium, light)
light)

Purchase
Purchase relationship
relationship
(ongoing;
(ongoing; intermittent;
intermittent; bad
bad
relationship)
relationship)

Examples of Possible Segmenting

Dimensions for Consumer Markets
CUSTOMER RELATED:
Customer needs (automobiles)
Geographic location (tire chains)
Age (insurance policies)
Sex (clothing)
Family size (child care services)
Income (vacation services)
Education (magazines)

SITUATION RELATED:
Benefits offered (toothpaste)
Consumption/use patterns (cameras)
Brand familiarity (health care products)
Buying situation (soft drinks)

Geographic dimensions for segmenting

consumer markets
Region
Region of
of world
world
or
or country
country (North
(North
America
America vs.
vs.
Europe)
Europe)

Geographic
Geographic
Segmentation
Segmentation
Dimensions
Dimensions

Size
Size of
of city
city

Region
Region in
in aa
country
country
(South
(South vs.
vs.
North)
North)

Demographic Dimensions for Segmenting

Consumer Markets
Income
Income
Sex
Sex or
or age
age
Demographic
Demographic
Segmentation
Segmentation
Dimensions
Dimensions

Family
Family size
size or
or family
family
life
life cycle
cycle
Occupation
Occupation or
or
education
education
Ethnicity
Ethnicity or
or social
social
class
class

Segmenting business markets

Kind
Kindof
of
relationship
relationship
(e.g.,
(e.g.,weak
weak vs.
vs.
strong
strongloyalty)
loyalty)
Purchasing
Purchasing
methods
methods(bids,
(bids,
e-commerce
e-commerce
websites)
websites)

Segmenting
Segmenting
Dimensions
Dimensions
for
for
Business
Business
Markets
Markets

Type
Typeof
of buying
buying
situation
situation
(centralized
(centralized or
or
decentralized)
decentralized)

Type
Typeof
of customer
customer
(service,
(service, Govt
Govt
agency
agencyor
or
manufacturer
manufacturer
Demographics
Demographics
(geographic
(geographic
locations;
locations; size
sizeof
of
firm
firm or
or industry)
industry)
How
How customers
customerswill
will
use
usethe
theproduct
product
(installation,
(installation,
component,
component, raw
raw
material)

Examples of Possible Segmenting

Dimensions for Business Markets
Type of organization (computer software)
Closeness of relationship with customer (travel
services)
Size (buildings)
North American Industry Classification System (NAICS)
codes (machinery)
Geographic location (electronic parts)
Type of product (X-ray film)
Buying situation (automobile components)
Source loyalty (office supplies)
Reciprocity (transporting services)

Business-toBusiness
Segmentation

Checking Your Knowledge

The pastor of a new church decides to start prospecting for
new members. He focuses first on people who live within a
mile radius of the church, and contacts them via mail and by
visiting them door-to-door. He then moves on to people who
live from one to two miles away from the church, then two to
three miles away, and so on, up to a limit of ten miles away.
The pastor appears to be focusing on a __________
segmenting dimension.

A. Behavioral
B. Demographic
C. Benefit
D. Geographic
E. Relationship

Ethical Issues in Selecting segmenting

dimensions

Ethical
Ethical
Issues
Issues

Exploitation
Exploitation

Creates
Creates
Unnecessary
Unnecessary
Wants
Wants

Does
Does Harm
Harm

International
International
Issues
Issues

Checking Your Knowledge

A father taking his family of four on vacation was trying to
make hotel reservations for a trip to Disney World. He first
eliminated all hotels that were in excess of two miles from the
main gate to Disney World. Then he focused exclusively on
hotels offering suites so that his family would have more
space. He eventually selected the Excelsior Hotel because he
knew the hotel offered suites and a complementary breakfast.
For him, the available of the complementary breakfast was a
______________ segmenting dimension.
A.
B.
C.
D.
E.

Qualifying
Determining
Differentiated
Geographic
demographic

Segmenting Product Markets

1.
1. Select
Select the
the broad
broad
product-market
product-market (what
(what market
market firm
firm wants
wants to
to be
be in)
in)
2.
2. Identify
Identify potential
potential
customer
customer needs
needs (why
(why people
people buy
buy product)
product)
3.
3. Form
Form initial
initial homogeneous
homogeneous Submarkets
Submarkets
(typical
(typical customer/aggregate
customer/aggregate similar
similar people)
people)

Best
Best
Practice
Practice
Approach
Approach
for
for
Segmenting
Segmenting
Product-Markets
Product-Markets

4.
4. Identify
Identify determining
determining dimensions(customer
dimensions(customer
-related
-related characteristicse.g.,
characteristicse.g., economic
economic needs)
needs)

5.
5. Name
Name possible
possible product-markets
product-markets
(based
(based on
on importance
importance of
of determining
determining detm.
detm
6.
6. Evaluate
Evaluate product-market
product-market
Segments
Segments (why
(why behave
behave as
as they
they do)
do)
7.
7. Estimate
Estimate size
size of
of each
each
product-market
product-market segments
segments

More Sophisticated Techniques May

Help in Segmenting
Clustering
Clustering
(find
(find similar
similar patterns)
patterns)

Customer
Customer Database
Database
(past
(past customer
customer behavior)
behavior)
Customer
Customer Relationship
Relationship
Management
Management (CRM)
(CRM) (modeling
(modeling
help
help predict
predict types
types of
of products
products
customer
customer might
might want
want or
or need
need
based on information in database)

Positioning

Positioning

2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Product Space Representation of

Positioning
High moisturizing

Tone

Zest
Lever 2000

Dove
5

Nondeodorant

2
Lux

Coast

Sensitive

Safeguard

Deodorant
1
Dial
Lifebuoy

Lava

low moisturizing

Positioning and Advertising

2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

TOO MANY UNNECESSARY

PRODUCTS ARE OFFERED
NECESSITY IS IN THE
EYE OF THE
BEHOLDER.
WHO SAYS THIS IS AN
UNNECESSARY
PRODUCT?
NOT FOR THIS DOG!

Study Question 1
Which of the following is the BEST
example of a "generic market?"
A.the meat market.
B.the minivan market.
C.the e-commerce market.
D.the beer market.
E.the "singles" entertaining market.
40

Study Question 2
Which of the following is the BEST
example of a "generic market?"
A.The adult "personal expression" market
B.The roller blade market
C.The female exercise shoes market
D.The sports drink market
E.The sporting goods market

41

Study Question 3
A product-market is one
A.In which exchanges are based on barter rather than money.
B.Where one seller has a patent for a superior product and
other firms try to imitate the leader the best they can.
C.Where all of the customers want the same product but will
consider a substitute if their preferred brand is not available.
D.In which competing sellers offer physically or conceptually
similar products.
E.In which no intermediaries operate.

42

Study Question 4
Which of the following offers a firm the
greatest potential for profit?
A.Mass marketing
B.The multiple target market approach
C.The combined target market approach
D.The single target market approach
E.Any of the abovedepending on the situation

43

Study Question 5
A large firm with ample resources wants to minimize the risk of
"inviting competitors to "chip away" at its target market(s). It has
segmented its broad product-market and identified several
Homogeneous submarketseach of which is large enough to offer
attractive sales and profit potential. Which of the following
approaches should the firm use?
A. Multiple target market approach
B. Mass marketing approach
C. Combined target market approach
D. Single target market approach
E. All of the above

44