Marketing Ch. 8
Product Positioning Using Perceptual Maps
A key to positioning a product or brand effectively is discovering the perceptions in the minds of potential customer by taking four steps: 1. identify the important attributes for a product or brand class. 2. Discover how target customers rate competing products or brands with respect to these attributes. 3. Discover where the company's product or brand is on these attributes in the minds of potential customers. 4. Re position the company's product or brand in the minds of potential customers.
Patronage of Fast Food Restaurants
Experian Simmons asked adults which fast food restaurants was the sole or only restaurant, the primary one, or one of several secondary ones they patronized. 0.7 percent of "sole restaurant" patrons of wendy's and the 12.5 percent of "primary restaurant" patrons of Wendy's and somewhat lower for Burger King and far lower than those for McDonald's. So your challenge is to look at these two competitors and devise a marketing program to win customers from them.
Ways to Segment Organizational (Business) Markets
Geographic Segmentation: Statistical Area-Firms are located in a metropolitan statistical area might receive a personal sales call, whereas those in a micropolitan statistical area might be contact by telephone Demographic Segmentation: NAICS Code- firms categorized by the North American Industry Classification System Code as manufacturers that deal with customers throughout the world might have different document printing needs than retailers or lawyers serving local customers Demographic Segmentation: Number of Employees-The size of the firm related to the volume of digital documents produced, so firms with varying numbers of employees might be specific target markets for different Xerox MFPs. Behavioral Segmentation: Usage Rate- Similar to this segmentation variable for consumer markets, features are often of major importance in organizational markets. So Xerox can target organizations needing fast printing, copying, faxing and scanning in color.
Two Approaches to Product Positioning
Head-to-head positioning involves competing directly with competitors on similar product attributes in the same target market Differentiation Positioning involves seeking a less-competitive, smaller market niche in which to locate a brand.
Product Positioning
refers to the place a product occupies in consumers' minds based on important attributes relative to competitive products.
Potential for Increased Profit
the best segmentation approach is the one that maximizes the opportunity for future profit and return on investment. If this potential is maximized without segmentation, don't segment. For non-profit organizations, the criterion is the potential for serving clients more effectively
Criteria to Use in Selecting the Target Segments
two kinds of criteria in the market segmentation process are those use to divide the market into segments and actually pick the target segments. Market Size-the estimated size of the market in the segment is an important factor in deciding whether it's worth going after. There is really not market for breakfasts among dormitory students with meal plans, so you should not devote any marketing effort toward reach this tiny segment. Expected Growth- Although the size of the market in the segment may be small now, perhaps it is growing significantly or is expected to grow in the future. Competitive Position- is there a lot of competition in the segment now or is there likely to be in the future? the less the competition, the more attractive the segment is. Cost of Reaching the Segment- a segment that is inaccessible to a firm's marketing actions should not be pursued. Compatibility with the Organization's Objectives and Resources-
Choose the Wendy's Segment
ultimately, a marketing executive has to use these criteria to choose the segments for special marketing efforts. In terms of competitive position and cost of reaching the segment, you focus on the four student segments and not the three nonstudent segments.
Positioning the Product
when a company introduces a new product, a decision critical to its long-term success is how prospective buyers view it in relation to those products offered by its competitors.
One Product and Multiple Market Segments
when an organization produces only a single product or service and attempts to sell it to two or more market segments, it avoids the extra costs of developing and producing additional versions of the product. In this case, the incremental costs of taking the product into new market segments are typically those of a separate promotional campaign or a new channel of distribution;
When and How to Segment Markets
when it expects that extra effort will increase its sales, profit, and return on investment. When expenses are greater than the potentially increased sales from segmentation, a firm should not attempt to segment its market. Three specific segmentation strategies that illustrate this point are one product and multiple market segments, multiple products and multiple market segments, and segments of one, or mass customization.
Crafting a Formal Positioning Statement
Marketing managers often convert their positioning ideas for the offering into a succinct written positioning statement. Ideally, the statement identifies the target market and needs satisfied, the product (service) class or category in which the organization's offering competes, and the offering's unique attributes or benefits provided. The positioning statement is used not only internally within the marketing department, but also for others outside it, such as research and development engineers or advertising agencies.
Estimating Market Sizes for Wendy's
Now the size of the market in each cell (the unique market-product combination) of the market-product grid must be estimated. This involves estimating the sales of each kind of meal expected to be sold to each student and nonstudent market segment.
Cannibalization
The organization should also achieve increased revenues and profits from the product differentiation and market segmentation strategies it uses. When the increased customer value involves adding new products or a new chain of stores, the product differentiation-market segmentation trade-off raises a critical issue: are the new products or new stores simply stealing customers and sales from the older, existing ones?
Behavioral Segmentation: Usage Rate
Usage Rate: the quantity consumed or patronage - store visits- during a sprcific period. it varies significantly among different customer groups. 80/20 Rule: the idea that 80 percent of a firms sales are obtained from 20 percent of its customers.
Why Market Segments?
a business firm segments its markets so it can respond more effectively to the wants of groups of potential buyers and thus increase its sales and profits.
Step 4: Select Target Markets
a firm must take care to choose its target market segments carefully. If it picks too narrow a set of segments, it may fail to reach the volume of sales and profits it needs. If it selects too broad a set of segments, it may spread its marketing efforts so thin that the extra expense exceeds the increased sales and profits.
Market-Product Grid
a framework to relate the market segments of potential buyers to products offered or potential marketing actions.
Step 3: Develop a Market-Product Grid and Estimate the Size of Markets
a market-product grid is a framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization. In a complete market-product grid analysis, each cell in the grid can show the estimated market size of a given product sold to a specific market segment.
Simplicity and Cost Effectiveness of Assigning Potential Buyers to Segments
a marketing manager must be able to put a market segmentation plan into effect. This means identifying the characteristics of potential buyers in a market and then cost effectively assigning them to a segment
Perceptual Map
a means of displaying in two dimensions the location of products or brands in the minds of consumers. This enables a manager to see how consumers perceive competing products or brands, as well as the firm's own product or brand.
Product Repositioning
changing the place a product occupies in a consumer's mind relative to competitive products.
Zappos.com Strategy
customer segment originally consisted of people who wanted to have a wide selection of shoes, shop online in the convenience of their own homes, and receive quick delivery and free returns.
Forming a Market-Product Grid for Wendy's
developing a market-product grid means identifying and labeling, the markets (or horizontal rows) and product groupings (or vertical columns).
Groupings of Wendy's Products: Meals
finding a means of grouping the products a firm sells into meaningful categories is as important as grouping customers into segments. If the firm has only one product or service, this isn't a problem. But when it has many, these must be grouped in some way so buyers can relate to them. This is why department stores and supermarkets are organized into product groups, with the departments or aisles containing related merchandise. Likewise, manufacturers organize products into groupings in the catalogs they send to customers.
Difference of Needs of Buyers Among Segments
if the needs of the various segments aren't very different, combine them into fewer segments. A different segment usually requires a different marketing action that, in turn, means greater costs. If increased sales don't offset extra costs, combine segments and reduce the number of marketing actions.
Market Segments
involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action; are relatively homogeneous groups of prospective buyers that result from the market segmentation process; each market segment consists of people who are relatively similar to each other in terms of their consumption behavior.
Market segmentation is only a means to an end
it leads to tangible marketing actions that can increase sales and profitability; first stresses the importance of grouping people or organizations in a market according to the similarity of their needs and the benefits they are looking for in making a purchase. Second, such needs and benefits must be related to specific marketing actions that the organization can take, such as new product or special promotions
Segments of One: Mass Customization
means tailoring products or services to the tastes of individual customers on a high volume scale; economies of scale in manufacturing and marketing during the past century made mass-produced products so affordable that most customers were willing to compromise their individual tastes and settle for standardized products.
Similarity of Needs of Potential Buyers Within a Segment
potential buyers within a segment should be similar in terms of common needs that, in turn, lead to common marketing actions, such as product features sought or advertising media used
Multiple Products and Multiple Market Segments
producing multiple products is more expensive; is very effective if it meets customer's needs better, doesn't reduce quality or increase price, and adds to revenues and profits;
Potential of a Marketing Action to Reach a Segment
reaching a segment requires a simple but effective marketing action. If no such action exists, don't segment.
The Segmentation Trade-Off: Synergies versus Cannibalization
the key to successful product differentiation and market segmentation strategies is finding the ideal balance between satisfying a customer's individual wants and achieving organizational synergy, the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently. the "increased customer value" can take many forms:more products, improved quality of existing products, lower prices, easier access to products through improved distribution, and so on. So the ultimate criterion for an organization's marketing success is that customers should be better off as a result of the increased synergies.
Step 5: Take Marketing Actions to Reach Target Markets
the purpose of developing a market-product grid is to trigger marketing actions to increase sales and profits. This means that someone must develop and execute an action plan in the form of a marketing program.
Product Differentiation
the strategy of using different marketing mix actions to help consumers perceive a product as being different and better than competing products; the perceived differences may involve physical features, such as size or color, or nonphysical ones, such as image or price.
Variables to Use in Forming Segments for Wendy's
to analyze your wendy's customers, you need to identify which variabes to use to segment them. To segment the students, you could try a variety of geographic variables, such as city or zip code; demographic variables, such as gender, age, year in school, or college major; or psychographic variables, such as personality or needs.