MARKETING - Chapt 6

4 major STEPS in creating a Customer Value-driven Marketing STRATEGY?

1. Market SEGMENTATION 2. Market TARGETING 3. DIFFERENTIATION 4. POSITIONING

More re Behavioral Segmentation......... Many marketers believe that BEHAVIOR variables is the BEST STARTING PLACE for building market segments. Broken down further into 5 types of (Behavioral) segmentation

1. OCCASION Segmentation 2. BENEFIT Segmentation 3. USER STATUS 4. USAGE RATE 5. LOYALTY STATUS

3 STEPS involved in Market SEGMENTATION?

1. SEGMENTATION 2. TARGET MARKET (SEGMENT) SELECTION 3. POSITIONING

Now, onto DIFFERENTIATION & POSITIONING............ At the same time that a company is answering the first simple-sounding question (WHICH customers will we serve?), it must ALSO be asking the 2nd question.............. HOW will we serve them? How does a company do this ?

The company does this by deciding on a VALUE PROPOSITION.

TARGETING (also known as TARGET SEGMENT SELECTION) can be carried out at several DIFFERENT LEVELS. What are the LEVELS of TARGETING ?

1. Very BROADLY = UNDIFFERENTIATED / MASS MARKETING 2. Very NARROWLY = DIFFERENTIATED or SEGMENTED / MICRO-MARKETING 3. SOMEWHERE IN BETWEEN = CONCENTRATED / (niche)

BEHAVIORAL Segmentation

Divides buyers into segments based on their KNOWLEDGE, ATTITUDES, USES, OR RESPONSES to a product.

What does it mean to do AGE & LIFE-CYCLE Segmentation?

Dividing a market into DIFFERENT AGE & LIFE-CYCLE GROUPS

How about INCOME Segmentation? What is that?

Dividing a market into DIFFERENT INCOME SEGMENTS

What is is meant by doing GENDER Segmentation?

Dividing a market into different segments, BASED ON GENDER

FYI........In planning their differentiation and positioning strategies, marketers often prepare PERCEPTUAL POSITIONING MAPS. What are PERCEPTUAL POSITIONING MAPS?

PERCEPTUAL POSITIONING MAPS SHOW CONSUMER PERCEPTIONS OF THEIR BRANDS --- vs. those of competing products on important buying dimensions.

Re CHOOSING a TARGETING STRATEGY.............. Companies need to consider many factors when choosing a market-targeting strategy, such as ?

- Company Resources - Product Variability - Product's Life-cycle Stage - Market Variability - Competitor' Marketing Strategy

What are used as the BASIS for SEGMENTATION?

- GEOGRAPHIC - DEMOGRAPHIC - PSYCHOGRAPHIC (values & lifestyles) - BEHAVIORAL

INTERNATIONAL Markets' segmentation/marketing VARIABLES are ?

- GEOGRAPHIC location - ECONOMIC factors - POLITICAL & LEGAL factors - CULTURAL factors

NOTE: MULTIPLE SEGMENTATION BASES help companies to:

- Identify smaller, better-defined target groups - Identify and understand key customer segments - Reach customers more efficiently by tailoring market offerings & messages to customers' specific needs

What is the definition of UNDIFFERENTIATED / MASS MARKETING ?

A MARKET-COVERAGE Strategy in which a firm decides to IGNORE market SEGMENT DIFFERENCES -- & targets the WHOLE MARKET with ONE OFFER........ NOTE: UNDIFFERENTIATED / MASS TARGETING focuses on WHAT IS COMMON in the NEEDS OF CONSUMERS -- vs. rather than on what is different.......... The company DESIGNS a product and a marketing program that WILL APPEAL TO THE LARGEST NUMBER OF BUYERS.

What is a TARGET MARKET ?

A SET of BUYERS who SHARE COMMON NEEDS or CHARACTERISTICS that a COMPANY DECIDES to SERVE.

What is DIFFERENTIATED (or SEGMENTED) Marketing ?

A market-coverage strategy in which a firm decides to TARGET SEVERAL MARKET SEGMENTS -- & DESIGNS SEPARATE OFFERS for each. (******** DIFFERENTIATED MARKETING also INCREASES THE COST OF DOING BUSINESS............... A firm usually finds it more expensive to develop and produce, say, 10 units of 10 different products than 100 units of a single product. Developing SEPARATE MARKETING PLANS FOR SEPARATE SEGEMENTS REQUIRES EXTRA MARKETING RESEARCH, PROMOTION PLANNING, ADVERTISING, STAFF, ETC....... So, the company must weigh increased sales against increased costs when deciding on a differentiated marketing strategy.P

What is CONCENTRATED (or NICHE) Marketing ?

A market-coverage strategy in which a firm goes after a LARGE SHARE OF ONE OR A FEW SMALLER SEGMENTS or NICHES. (Concentrated marketing can be HIGHLY PROFITABLE. At the same time, it INVOLVES HIGHER-THAN-NORMAL RISKS).......... Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or larger competitors may decide to enter the same segment with greater resources).

Step 4: Positioning

ARRANGING for a market offering to OCCUPY a CLEAR, DISTINCTIVE & DESIRABLE PLACE RELATIVE TO COMPETING PRODUCTS in the MINDS OF TARGET CONSUMERS.

Step 3: Differentiation

Actually DIFFERENTIATING the firm's market OFFERING to create superior CUSTOMER VALUE.

FYI.... CONSUMER & BUSINESS marketers use MANY OF THE SAME VARIABLES to segment their markets. Business buyers can be segmented geographically, demographically (industry, company size), or by benefits sought, user status, usage rate, and loyalty status. YET........

BUSINESS Marketers also use some additional variables such as: Customer Operating Characteristics; Purchasing Approaches; Situational Factors, & Personal Characteristics.

5. LOYALTY STATUS

Consumers can be loyal to brands, stores & companies

5. Actionable =

DESIGNED for ATTRACTING & SERVING the segments. (ex: although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment ).

Step 1: Definition of: Market Segmentation

DIVIDING a MARKET into DISTINCT GROUPS OF BUYERS (sub-groups/segments) -- who have DIFFERENT NEEDS, CHARACTERISTICS OR BEHAVIORS.... & who might require SEPARATE MARKETING STRATEGIES OR MIXES.

What is GEOGRAPHIC Segmentation?

DIVIDING a market into DIFFERENT GEOGRAPHICAL UNITS. Such as: NATIONS, STATES, REGIONS, COUNTIES, CITIES & NEIGHBORHOODS

DEMOGRAPHIC Segmentation?

DIVIDING a market into SEGMENTS based on VARIABLES. Such as: AGE, LIFE-CYCLE STAGE, GENDER, INCOME, OCCUPATION, EDUCATION, RELIGION, ETHNICITY, & GENERATION

More re DIFFERENTIATED (or SEGMENTED) Marketing...............

Developing SEPARATE MARKETING PLANS -- FOR SEPARATE SEGMENTS REQUIRES EXTRA MARKETING RESEARCH, PROMOTION PLANNING, ADVERTISING, STAFF, ETC....... So, the COMPANY MUST WEIGH INCREASED SALES AGAINST INCREASED COSTS when deciding on a differentiated marketing strategy.

Segmenting INTERNATIONAL MARKETS....... FEW companies have the resources or the will to operate in all, or even most, of the countries that dot the globe. Although some large companies, such as Coca-Cola or Unilever, sell products in more than 200 countries, most international firms focus on a smaller set.

Different countries -- even those that are close together, CAN VARY GREATLY in their economic, cultural, and political makeup. So, just as they do within their domestic markets, INTERNATIONAL FIRMS NEED TO GROUP THEIR WORLD MARKETS INTO SEGMENTS -- with distinct buying needs and behaviors.

Step 2: Targeting

Evaluating each market segment's ATTRACTIVENESS & SELECTING ONE OR MORE market segments TO ENTER.

Important re INTERNATIONAL Market Segmentation............ What is INTERMARKET ( or Cross-market) SEGMENTATION ??

Grouping consumers with SIMILAR NEEDS & BUYING BEHAVIORS -- EVEN THOUGH they are in DIFFERENT LOCATIONS ( ex: Coca-Cola targets teens the world over through "universal teen themes," -- such as music and fun).

What is a VALUE PROPOSITION ?

HOW it will create DIFFERENTIATED VALUE for targeted segments & WHAT POSITIONS IT WANTS TO OCCUPY IN THOSE SEGMENTS. The key here is the DIFFERENTIATED VALUE a company/product provides!

3. USER STATUS

Markets can be segmented into non-users, ex-users, potential users, first-time users, & regular users

Choosing the right COMPETITIVE ADVANTAGE.......... Not all brand differences are meaningful or worthwhile, and each difference has the potential to create company costs as well as customer benefits. ESTABLISHING "DIFFERENCE" IS WORTH IT to the EXTENT THAT IT SATISFIES THE FOLLOWING CRITERIA:

Is it different because it is? ?? - Important - Distinctive - Superior - Communicable - Pre-emptivve - Affordable - Profitable

In what SPECIFIC WAYS can a company DIFFERENTIATE ITSELF or its market offer?

It can DIFFERENTIATE along the lines of: PRODUCT, SERVICES, CHANNELS, PEOPLE OR IMAGE.

The surge in digital and mobile technology has caused a corresponding surge in HYPERLOCAL SOCIAL MARKETING. What is "HYPERLOCAL social marketing?"

LOCATION-BASED TARGETING to CONSUMERS IN LOCAL COMMUNITIES OR NEIGHBORHOODS using digital and social media. (ex: local Dunkin' sends coupon for that same store -- to your phone after you make a purchase)

Marketers rarely limit their segmentation analysis to only one or a few variables............. Rather, they often to USE MULTIPLE SEGMENTATION BASES -- to help identify SMALLER, BETTER-DEFINED TARGET GROUPS.

MULTIPLE SEGMENTATION BASES

4. USAGE RATE

Markets segmented into light, medium & heavy product users

What are the 5 REQUIREMENTS for EFFECTIVE Segmentation?

Market Segments must be: 1. Measurable 2. Accessible 3. Substantial 4. Differentiable 5. Actionable

3. Substantial =

Market segments are LARGE or PROFITABLE ENOUGHT TO SERVE. - A segment should be the LARGEST POSSIBLE HOMOGENEOUS GROUP WORTH PURSUING with a TAILORED marketing program. (ex: Would not pay for a car manufacturer to develop cars especially for people who are 7 feet or taller).

PSYCHOGRAPHIC Segmentation

Marketers SEGMENT their markets using variables such as: - SOCIAL CLASS - LIFESTYLE - PERSONALITY characteristics (*** PSYCHOGRAPHIC segmentation is done because the PRODUCTS PEOPLE BUY REFLECT THEIR LIFESTYLES)

Very IMPORTANT re POSITIONING............. CONSUMERS position products -- with or without the help of marketers. But, marketers do not want to leave their products' positions to chance!!....................

Marketers must plan positions that will GIVE THEIR PRODUCTS THE GREATEST ADVANTAGE in selected target markets -- & they must DESIGN MARKETING MIXES TO CREATE THESE PLANNED POSITIONS.

More re MASS (or UNDIFFERENTIATED) MARKETING.........

Most MODERN MARKETERS HAVE STRONG DOUBTS ABOUT THIS STRATEGY......... Difficulties arise in developing a product or brand that will satisfy all consumers......... Mass marketers often have trouble competing with more-focused firms -- who do a better job of satisfying the needs of specific segments and niches.

What basic question does MARKET SEGMENTATION address?

Q: "What customers will we serve?"

What is a market SEGMENT?

Relatively HOMOGENEOUS GROUP of POTENTIAL CUSTOMERS

Segmentation SYSTEMS........ Several business information services provide systems that HELP MARKETERS segment people & locations into MARKETABLE GROUPS OF LIKE-MINDED CONSUMERS. Specifically, Segmentation SYSTEMS do what ?

Segmentation SYSTEMS MERGE geographic, demographic, lifestyle, and behavioral data -- to help companies segment their markets DOWN TO ZIP CODES, NEIGHBORHOODS & EVEN HOUSEHOLDS. (ex: of companies doing this Nielsen, Experian, Esri, Axiom, etc)

1. What is OCCASION Segmentation ?

Segments are divided according to OCCASIONS -- WHEN the buyers: - Get the idea to buy - Make their purchase - Use the purchased item

2. What is BENEFIT Segmentation ?

Segments divided according to different BENEFITS that consumers seek from the product (Ex: Fitbit - People buy wearable health and activity trackers are looking for a variety of BENEFTITS -- from counting steps taken and calories burned -- to heart rate monitoring and high-performance workout tracking and reporting).

1. Measurable =

The SIZE, PURCHASING POWER & PROFILES of the segments can be measured.

How do firms DIFFERENTIATE the SERVICES that accompany the product?

Some companies gain SERVICES DIFFERENTIATION -- through SPEEDY, CONVENIENT SERVICE.

REMEMBER (1st flashcard): When CREATING A CUSTOMER VALUE-DRIVEN MARKETING STRATEGY, the 1st step is Segmentation (all the stuff you just studied). Then comes TARGETING............................ What is TARGETING? decide WHICH & HOW MANY SEGMENTS IT WILL TARGET. Market targeting can be carried out at several different levels. Figure 6.2 shows that companies can target very broadly (undifferentiated marketing), very narrowly (micromarketing), or somewhere in between (differentiated or concentrated marketing).

TARGETING is DECIDING WHICH & HOW MANY SEGMENTS it will target.

2. Accessible =

The market segment can be EFFFECTIVELY REACHED & SERVED.

MICROMARKETING

The practice of TAILORING PRODUCTS & MARKETING PROGRAMS to SUIT THE TASTES of SPECIFIC INDIVIDUALS & LOCAL CUSTOMER SEGMENTS. Rather than seeing a customer in every individual, Micromarketers see the individual in every customer............. Micromarketing INCLUDES: 1) LOCAL Marketing & 2) INDIVIDUAL Marketing

More re Segmentation (professor's alternative explanation/definition)

The process of BREAKING DOWN POTENTIAL CUSTOMERS (total market) into SUB-GROUPS or smaller segments that have: - COMMON NEEDS - WILL RESPOND SIMILARLY to a market ACTION (The company does this by identifying different ways to segment the market and develops profiles of the resulting market segments)

4. Differentiable =

The segments are CONCEPTUALLY DISTINGUISHABLE & RESPOND DIFFERENTLY TO DIFFERENT MARKETING MIX ELEMENTS & PROGRAMS. (If men and women RESPOND SIMILARLY to marketing efforts for soft drinks, they DO NOT CONSTITUTE SEPARATE SEGMENTS).

Product Position

The way a product is DEFINED BY CONSUMERS on important attributes -- the PLACE the product OCCUPIES IN CONSUMERS' MINDS, RELATIVE TO COMPETING PRODUCTS.................. REMEMBER: PRODUCTS are made in FACTORIES -- BUT BRANDS happen IN THE MINDS OF CUSTOMERS.

HOW do companies DIFFERENTIATE their PRODUCT ?

Through PRODUCT differentiation, brands can be differentiated on FEATURES, PERFORMANCE, STYLE OR DESIGN.

More on DIFFERENTIATON & POSITIONING........... To build profitable relationships with target customers, marketers must UNDERSTAND CUSTOMER NEEDS & DELIVER MORE CUSTOMER VALUE, better than competitors do. To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage.

To FIND POINTS OF DIFFERENTIATION, marketers must THINK THROUGH THE CUSTOMER'S ENTIRE EXPERIENCE with the company's product or service. An alert company can FIND WAYS TO DIFFERENTIATE ITSELF AT EVERY CUSTOMER CONTACT POINT.........

When a COMPANY'S RESOURCES ARE LIMITED, which targeting strategy is best?

When the FIRM'S RESOURCES ARE LIMITED, CONCENTRATED MARKETING makes the MOST SENSE.