MTG 315: Ch 9 (Market Segmentation, Targeting & Positioning)

organizational synergy

- increased customer value achieved through performing organizational functions like marketing & manufacturing more efficiently -Increased value through more products & increased quality, lower prices, easier access to products through improved distribution, etc.

steps in segmenting & targeting markets

-5 step process used for market segmentation & selecting target segments to focus on -Ex. Just purchased a Wendy's near an urban university 1. Group potential buyers into segments 2. Group products to be sold into categories 3. Develop a market-product grid and estimate size of markets 4. Select target markets 5. Take marketing actions to reach target markets

80/20 marketing

-80% of a firms sales obtained from 20% of its customers; small fraction of customers provides most sales

product location

-Certain products we are specific about where we buy/very habitual always to the same place -ex. Going to apple to buy phone, clothing, grocery behavior- know where stuff is & it's familiar, gas station behavior -Can incentivize people to go to new store/restaurant locations by awarding discounts/reward points/etc.

Similarity of Needs of Potential Buyers in a Segment

-Common needs → common marketing actions -Look for buyers that approach product similarly/want similar things out of a product & grouping them based on these needs

product user

-Define ourselves based on who product is intended for -Ex. Skinny girl cocktails -Health-conscious women, age range 20-35ish, staying in shape & wanting to lose weight but wanting to drink too -Who is our buyer & defining by buyer

why segment markets?

-Firms segment markets to respond more effectively to the wants of groups of potential buyers & increase sales/profits

Segment Differences/Differences in Needs Among Segments

-If needs aren't very different, combine into fewer segments to decrease cost -What makes buyers different in the marketplace, helps you figure out how to satisfy certain needs

monitor & adapt

-In order for people to truly understand us, pick an identity that's flexible to last a long time & can be interpreted in many different ways -Ex. Subaru: longevity -Ex. BMW using same slogan since 1985, "the ultimate driving machine," defined brand as engineering marvel- have to be special to have our car, first to add on electronic controls- other cars aren't doing this, first to offer extended service package (pay nothing on vehicle until 32,000 miles) became something different yet again, safety features, held onto engineering message throughout as well, how we interpret/explain message throughout time changes

increased profit

-Maximize opportunities for future profit & return on investment -Does going through segmentation process make me more profitable? -If I determine there are smaller groups of buyers I need to focus on, need to make different marketing mix for each different group of buyers, adjust product/price/place/promotion → automatically means higher cost, only want to segment if it makes me more profitable & I can pay for that process b/c otherwise there's no point in doing it

marketing synergies

-Opportunities for efficiency in terms of a marketing segment -Ex. Apple focusing on 1 group of customers- choose medium/large businesses, create 1 ad to reach this target segment -Marketing synergies often come at the expense of product synergies b/c one customer segment requires a variety of products → save money on marketing but spends lots on production

product synergies

-Opportunity for efficiency in research & development & production -Ex. Apple wants to decrease research & design costs & simplify product lines, so they choose to manufacture iMacs b/c every segment buys it -Product synergy emphasized = marketing addresses concerns of variety of customers which costs time & money

positioning statements

-Positioning ideas → positioning statement -Identify... a) Target Market: who we're serving b) Needs Satisfied c) Competition Category: what competition category we are operating in (ex. Protein bars) d) Unique Benefits/Attributes: what is special about our offering that others don't provide

Possible Marketing Action to Reach a Segment

-Reaching segment requires effective marketing actions -No action exists → don't segment -ex. Marketing to people with above average foot sizes- use spokesperson, are you able to take a marketing action?

price & quality

-Relationship b/w the two can be anything you want it to be- value or high-end, using price & quality to define brand -Ex. Save money, live better Walmart -Ex. B&D & DW: reaching different groups based on price/quality -Ex. Luvs & pampers: different parents, luvs = smart parent choice (low cost great quality); pampers (fancy, really show baby you love them, high quality special good diapers, most hospitals use)

criteria used in forming segments

-Simplicity/Cost Effectiveness of assigning potential buyers to segments -increased profit -Similarity of Needs of Potential Buyers in a Segment -Segment Differences/Differences in Needs Among Segments -Possible Marketing Action to Reach a Segment

when/how to segment markets

-Slow economic growth → decreased size of middle income market → offer products to reach high/low income families -A business will go through the trouble to segment markets when this effort is expected to increase sales/profit/return on investment -3 Segmenting Strategies... a) One product & multiple market segments b) Multiple products & multiple market segments c) Segments of one: mass customization

market segmentation

-aggregating prospective buyers into groups/segments that have common needs & will respond similarly to marketing actions -Market segments = people similar in terms of purchasing behavior, result from marketing segmentation

demographic segmentation

-based on objective physical (gender, race), measurable (age, income), or other characteristics (occupation/birth era) of customers -Ex. Household Size- Campbells produces products with serving sizes for 1-2 people because almost half of all US households have 1-2 people -Age -Gender -Family size or life cycle -Income -Occupation -Education -Religion -Race -Generation -Nationality -MOST COMMON FORM OF SEGMENTATION: b/c easiest due to very distinct differences b/w different demographic groups & not difficult info to get from people (exception is income) -Great place to start, important to understand & has an impact on how people behave in the marketplace, BUT sometimes consumers look a lot alike on paper but behave differently in the marketplace -Need more info to truly understand customers

geographic segmentation

-based on where customers live/work -World region or country -City or Metro Size -Density or Climate -Impacts types of clothing that you purchase -Hurricanes/inclement weather- keep a stock of supplies on you -Snow yes/no = determine if you purchase shovel/snow blower -Make the grass look nice (lawn services to aerate, mowing- mow a lot so will be particular about mower you buy, weed killer, sprinkler system in ground) vs in Arizona buy turf or rocks instead of grass/pay more attention to pools there -Pools very weather dependent in Midwest & ROI is limited to summer months, pool treatments cost $- might have cleaning services -Overall impacts clothes, food, homes, lots of stuff wrapped up in geographic sensibility -Food is very location-specific, call the same foods different things in different areas -Vehicles are another example -Country by country differences in what customers want/what they like (ex. Smaller homes in Europe vs in USA, so smaller appliances in Europe) -Buying/living/shopping in urban/suburbs/rural is all very different & impact buying behavior

head to head positioning

-competing directly w/competition on similar product attributes in some target market

perceptual map

-means of displaying in 2 dimensions the location of a product/brand in the minds of consumers -PERCEPTION BASED, may (not) be data that backs it up -Can look at all products w/in one organization or how our product stacks up against competition -Visual representation of how customers understand our brand vs our products/competitors -Get an accurate idea of how people see market place & also to come up w/business ideas/products to develop -Ex. Chocolate Milk & Adults -Important attributes: adults judge drinks based on low/high nutrition & children vs adult drinks -How adults see chocolate milk: moderately nutritious but overall categorize it as a child's drink -Have to re-define/reposition chocolate milk to make it look more adult: Glass bottle, Sold at gas stations by soda/tea/etc., Packaged as adult size servings bigger than kids sizes -Messaging: high in Ca, replenish sugar supply after workout, protein content as well -Appealing to adults b/c of nutritional benefits & don't think of it as a kids drink anymore -NEXT: Pick positioning strategy

cannibalization

-new products/chains stealing customers/sales from older/existing ones -Lines blur b/w marketing segments → problems -Ex. LOFT / Ann INC. / Ann Taylor

needs

-part of psychographic segmentation -Ex. Could be in terms of customer support like Cricket phones for older people for calling relatives or calling 911, these people require tech that is not complicated- need a lot of support/need company to do the work for them

lifestyles

-part of psychographic segmentation -Governs things we buy, are we dealing with fanatics/casual interest in what we sell?, how we perceive ourselves, understanding groups of interest is important -ex. See yourself as a certain athlete = will buy certain gear for that particular sport probably from certain brands related to that sport -Ex. Star Wars in WDW, very little overlap b/w SW & Disney fans, not a lot of SW fans willing to pay price to get into WDW

differentiation positioning

-seeking a lower competition, smaller market niche in which to locate a brand

psychographic segmentation

-subjective mental/emotional attributes (personality), aspirations (lifestyle), or needs of the prospective customers -personality -needs -lifestyles -INTERNAL THINGS THAT GOVERN BEHAVIOR

Ways to segment consumer markets

geographic, demographic, psychographic, behavioral

communication & delivery of position

take strong steps marketing mix must support monitor & adapt

one product & multiple market segments

-1/3 segmenting strategies -1 single product/service is produced -Attempt to sell to 2+ market segments -Avoids the costs of developing/producing additional versions of a product -Costs of taking the product into new market segments = separate promotional campaigns or new channels of distribution used -Ex. Magazines with different covers but same content inside -Ex. Books marketing to (pre)teens & adults -Ex. Disney Resorts = same experience for kids/parents/ grandparents

multiple products & multiple market segments

-1/3 segmenting strategies -Ex. Ford: different lines of cars/SUVs/trucks/etc. targeted at different types of customers -Producing different vehicles = increased cost than producing one vehicle BUT is effective if customer needs are met, there is no decrease in quality or increase in price, or if it adds to sales & profits

segments of one: mass customization

-1/3 segmenting strategies -tailors produce/serve to tastes of individual customers on a high-volume scale -mass customization is the next step beyond build-to-order: when a product is manufactured only when there's an order

1. Group potential buyers into segments

-Consider if market segmentation is worth doing (NOT always good to do) -use criteria to form segments -there are 4 ways to segment markets -Prospects (might become users) more important than non-prospects (never likely to become user) -80/20 rule Ex. Wendy's -Heavy user market segment is important, so focus marketing efforts here -New menu items/promo strategies could succeed in converting prospects into users that patronize Wendy's -Variables to use in forming segments for Wendy's a) Behavioral: student vs. non-student Students: where they live & when they're on campus i) Students in dorms ii) Students living near campus in apartments iii) Day commuter students living outside area iv) Night commuter students living outside area Non-students: connected w/university yes or no, harder to reach b/c this segment isn't as similar i) Faculty & staff who work at university ii) People who live in the area but aren't connected with the university iii) People who work in the area but aren't connected with the university

cultural symbols

-Creating an icon of some sort intended to represent the brand, becomes face of brand & defines what it is -Key for children's food products -Ex. Insurance brands: can't see what you buy (Geico, Progressive) -Ex. Chick Fil A cow -Ex. Aflack: duck, got put on map b/c used to be unheard of but duck made people more aware of their company -Problem = nobody knows what kind of insurance they have- it's long-term disability & nobody knows where you buy this insurance... B2B: only sell to employers, marketing to you the individual to have you go to HR department & ask about Aflack, brand recognition is there but challenge is what do I do with this knowledge & how to I buy it

take strong steps

-Critical about positioning: have to COMMIT, wishy washy positioning makes you like Sears (diluted own brand so much that they have 0 reputation, not on anyone's radar, not answer to anyone's problems anymore, lost position of strength when they moved away from appliances b/c nobody had a reason to go there anymore) -Ex. Go to Walmart b/c cheap & everything is there -Ex. Go to target b/c its not Walmart -Ex. Burger King: quit being home of whopper, now are back w/impossible meat whopper

use or application

-Define the product by the context/circumstance under which it is used -Ex. Vicks: cold remedy works different than any other remedy -Ex. Campbells: good on a cold day

Step 3: Develop a Market-Product Grid and Estimate the Size of Markets

-Determine Market Size: grouped buyers- which one has most potential & how many people in each category, how many of each kind of buyer do we have; market potential- what is going to happen in the marketplace in the next few years -Ex. Marketing to gen z- going to buy houses/apartments/etc soon, looking @ future NOT just current markets -MPG for Wendy's a) Horizontal: markets- student vs. nonstudent b) Vertical: products- meals/eating occasions -Estimating Market Sizes for Wendy's a) Estimate sales of each kind of meal expected to be sold to each student & non-student market segment b) Helpful in determining which target market segments to select & which product groupings to offer

marketing mix must support

-Everything we do in marketing mix has to live out our positioning as well, need consistent message, MM has to live out everything we say about the brand

examples of geographic segmentation

-Ex. Campbells increased spiciness of nacho cheese in TX & CA -ex. In summer buying ice cream vs in winter buying hot chocolate -Ex. McDonald's different menus throughout the world -Ex. Barbecue is very specific to region it comes from -Rural: not many stores around, buy in bulk when you do go to the store b/c stores very far away, combo of making big grocery runs/going to warehouse locations & buying from local providers in b/w going to grocery store -City: don't need a car b/c added expense, if you don't have a car can't load up on products- walk/public transport means you just buy a few bags worth of groceries, stores don't usually stock bulk items b/c city residents aren't buying in bulk -Suburbs: shop like once per week -Know where customers come from & how the geography impacts their purchases/behavior

grouping buyers

-Getting this right sets us up to be more successful, less effective when we try to please everyone, can't be effective when we try to take care of everyone's needs, need to match possible markets to products we make -Ex. Coke: widely available everywhere, reason why people drink Coke is the same everywhere, will NOT segment in this case b/c buyers don't change motivation for purchasing/ why they purchase/etc. -In most cases, grouping buyers by similarity helps us be more effective

Simplicity/Cost Effectiveness of assigning potential buyers to segments

-ID characteristics & assign to segments -Can we simply & cost effectively ID differences in the market? (Group a, b, c behaves in x, y, z manner & how each differ from each other)

discover perceptions of customers by...

-Identifying the important attributes for a product/brand class -Discover how target customers rate competing products/brands w/respect to these attributes -Discover where the company's product/brand is on these attributes in the minds of potential customers -Reposition the company's product/brand in the minds of potential consumers

product features

-Knowing what features are needed on a particular product -Ex. Cameras, photographers want different features/other lenses & equipment vs people who are point & shoot that may not buy cameras -Ex. Product features & what features are important to different customers- dorm appliances w/microwave & fridge all in one

segmentation: linking needs to actions

-Market Segmentation & selecting segments as targets is the link b/w buyer need & the marketing program -Market Segmentation = ID market needs → link needs to marketing actions → execute marketing program actions

Step 5: Take Marketing Actions to Reach Target Markets

-Marketing actions: customize actions/marketing mix specifically to the groups of buyers that you are choosing to serve -Market-Product Grid → Take Marketing Actions → Increase Sales/Profits -Someone must develop/execute the action plan in the form of a marketing program a) Wendy's Segmentation Strategy -Ad actions might include -Day commuters market segment: ads in commuter buses & flyers in car wipers -B/w meal snacks (all market segments): happy hour b/w 2-4:30pm 10% off -Dinner to night commuters (unique market-product combination): flyers in car wipers, free frosty on drive-thru purchase b/w 5-8pm b) Keeping an Eye on Competition -McDonalds: slushies, sustainable beef, mobile orders -Burger King: mac & cheetos, crispy chicken sandwich -Five Guys: points of difference = simple menu w/fresh beef & no trans fats -NOT JUST COMPETING W/BURGER PLACES but also w/other fast food options (Chipotle, Panera, Noodles, etc.), also smoothie outlets, convenience stores, coffee shops c) Strategies for Your Wendy's -Strategies alter from time to time b/c customer tastes & competition change -Look at what Wendy's HQ is doing/what competition is doing/what is changing in area of your Wendy's

competitor

-Solves same problem in the SAME way as opposed to a different way, we also name competitor when we position this way -Ex. Pizza Hut talks about how they compare to Papa Johns & Dominos -Ex. Cleaning/paper products (two paper towels, which gets it cleaner, which destroys more germs)

value proposition

-Statement of benefits a customer receives from a product/service/idea -Last piece to have strong positioning strategy = have to have something that sets you apart from other brands/what makes you different -VP: encapsulates how we are defined, position strategy & who we serve -Country crock ad for example: no softening required, makes product special/unique in marketplace

attitudes & benefits

-Straightforward, define product in terms of features it has & benefits it provides -Ex. Country Crock Butter: no softening needed -Ex. RxBar: natural ingredients, high protein, only ingredients on front of label -Ex. Smoothie King: keto smoothies, highlighting nutrition content specific to diet plans -Ex. Subaru: emphasizing safety/how long they last -Ex. PlayStation: faster, more storage, play DVDs (almost ALL TECH uses this strategy)

segmentation trade off...

-Successful product differentiation & marketing segmentation = ideal balance b/w satisfying customer wants & achieving organizational synergy -synergy -cannibalization

Step 4: Select Target Markets

-Target Markets: identify which of those particular groups are best match for my products & have best potential in terms of sales -Companies build buyer personas: typical buyer, segmentation descriptors, get into buyers head & understand how they make buying decisions/what products are they interested even outside my products, key = gets us out of our own heads, stop making generalizations about everyone- there are different pockets of buyers everywhere -Once we know who we're talking about, it starts to guide the decisions we make → marketing actions -Market segments too narrow → unable to reach volume of sales & profits needed -Market segments too broad → spread marketing efforts too thin, expenses exceed profit -Criteria to select target segments -2 types of criteria are those used to a) divide a market into marketing segments (already discussed) & those used to b) actually pick the target segments -5 criteria used to select target segments a) Market size: important to decide whether the target segment is worth going after b) Expected growth: even if market size is small, maybe it's growing or is expected to grow soon c) Competitive position: is there a lot of competition now/will there be soon, low competition = high segment attractiveness d) Cost of reaching segment: if target segment isn't accessible, do NOT waste money on ads for them e) Compatibility w/the organization's objectives & resources: what resources you have, what policies are in place -Wendy's: Decide based on criteria to focus 4 student segments & NOT on non-student segments

product class

-Using & comparing 2 different ways of solving same problem -Ex. Ranch as the "new ketchup" -Ex. Artificial sweeteners compared to other artificial sweeteners or sugar -Ex. Chick Fil A: eating chicken compared to beef -Ex. Turbotax & HR Block -TT: online, you are smart enough to do taxes, we will help you & give you platform to do it -HRB: in person, you don't have to do it on own, people will personally answer questions for you

Step 2: Group Products to be Sold into Categories

-What are we offering & does it match up with the buyers that are out there, do we need to create products to fit needs of buyer group -Individual Wendy's Products a) Products include: burgers, frostys, fries, salads, chicken sandwiches, salads, etc. b) Non product innovations help increase consumer convenience lik drive-thrus, E-pay, Wendy's mobile app c) Each product/innovation NOT targeted equally to all market segments based on gender, needs, or university affiliation -Groupings of Wendy's Products: Meals a) Makes most sense to group products into meals: breakfast, lunch, b/w meal snack, dinner, after-dinner snack b) Group items to help buyers relate to them c) Grouping products just as important as grouping consumers into segments

behavioral segmentation

-based on observable actions/attitudes (where they buy, what benefits they seek, how frequently they buy, why they buy) -product features -purchase location -Very specific, hard to self-report -Hardest to do but gives a lot of good information -Who buys when, how much do they buy & if they don't choose to buy how do they meet that need? -usage rate -user status

product repositioning

-changing the place a product occupies in a consumer's mind relative to competitive products -2 Approaches to Product Positioning: head to head & differentiation

frequency marketing

-ex. Frequent flyer programs, focuses on usage rates

product differentiation

-firm uses different marketing mix actions to help consumers perceive products as different/better than competitors

market product grids

-framework to relate the MS of potential buyers to products offered & potential marketing actions -Horizontal = different market segments -Vertical = different product offerings -Ex. Different market segments for bed pillows = side vs back vs stomach sleepers (on horizontal row of grid) & product offerings = firm pillows vs medium pillows vs soft pillows (on vertical row of grid) -MPG show relative importance of market segments

user status

-level of expertise/comfort level with the brand -Ex. Starbucks buying 1x month or less = these people are overwhelmed b/c so many options & different language used (this is supposed to make people feel like they are apart of something), stars/membership level recognizes buyer commitment -Ex. "Regular status" at restaurants, people know order/table/etc keeps you coming back b/c like intrinsic feeling (makes you feel good) -Who are our people? Take care of them b/c will keep them coming back

personality attributes

-part of psychographic segmentation -definitely governs behavior, not always applicable, but typically there is a personality component in customers -Ex. Using sharpie to write all the time to write = sharpie users are "bold impression makers" that stand out due to talent/ability or personality- want to make their mark on the world, black ones used to label stuff & most people don't pay attention to it- sharpie doesn't care about us- they care about people who write in them all the time/have different colors & points & use sharpies for art, using pens to reach out to different audiences

usage rate

-quantity consumed/patronage/store visits during a specific period -Ex: Amazon Prime 63% customers are Prime members Ave spend/year for Prime is $1300 51% of Prime > $800/yr vs. 16% non-Prime 75% of Prime shop 2-3x/month vs 20% -80% revenue from 20% of customers, if you know who 20% is & take good care of them → other people follow along for ride anyway, be concerned about 20% & what those people want (ex. Snapchat changed layout b/c didn't think about user base, lost ground to Instagram & now playing catchup) -Amazon prime: created to take care of their "best people," if Amazon can get you into the Prime circle > behavior will automatically change b/c want to get benefit of the service, driver of what gets enrollments... a) Prime Day -created for exclusive specials for members -people hate idea of being left out & love idea of beating clock -get people to sign up for memberships knowing that now they have you to drive other behaviors -can push off shipment day to earn cash/credit back- paying for membership & fast shipping but not even using that aspect of the membership -can pick deliveries to all arrive on one day- good for people in apartments but ultimately good for Amazon b/c they only pay 1 shipping fee & put everything in one box

product position

-refers to the place a product occupies in consumers' minds based on important attributes relative to competitive products -All about perception, how do customers understand our brand, if they would describe it to a friend what attributes would they talk about -Challenging: as a business you work hard to craft a certain idea about your business/products you sell, spend money on ads trying to get people to buy into things, but customer ultimately decides how they feel about a brand based on their/their friends/family's experience & what they see in the news -Ex. Black & Decker, DeWalt -Difference: B&D cheaper, B&D around the house, DW better quality & maybe used by construction workers/in the trade, DW sold Home Depot/Lowes, B&D Walmart -Both are B&D brands, distinctions b/w the two to have different identity -DW looks sturdier, more expensive, more expansive range of products, greater power -Coming from same source, but difference is what B&D is telling us they are for -Can do better job of meeting needs by making this distinction, at home project people don't want bulkier DW product for ex. -Distinction comes from superficial qualities

positioning can be done by...

attitudes & benefits price & quality use or application product class product user competitor cultural symbols