Marketing Chapter 4

Differentiation

-A positioning strategy that some firms use to distinguish their products from those of competitors Ex. Rolex ads What really matters is that the consumer perceives the marketer's product to be different.

Motive Segmentation

-Carmakers might appeal to customers with status-related motives, whereas baby products appeal to emotional motives

Segmentation

-Defining markets -Dimensions to use -Identifying segments -Identifying segments to target -Segmentation approaches Within a market, a market segment is a subgroup of people or organizations with one or more characteristics that cause them to have similar product needs. Market segmentation is the division of a market into meaningful, relatively similar, and identifiable segments or groups.

Positioning

-Developing a specific marketing mix to influence potential customers' overall perception of a brand, product line, or organization in general

Ethical Issues in Selecting Segmenting Dimensions

-Exploitation -Creates unnecessary wants -Does harm Success in international marketing requires even more segmenting, because there are so many countries, languages, and unique cultures. However, segmenting international markets adds just one step to the whole process of segmentation. First, marketers must segment by country or region, and then proceed with the same basic segmentation approaches already discussed.

Lifestyle Segmentation

-How time is spent -Importance of things around them -Beliefs -Socioeconomic characteristics

Demographic segmentation dimensions

-Income -Sex or age -Family size or family life cycle -Occupation or education -Ethnicity or social class 1) Income provides one basis—a marketing mix may appeal most to families with a particular income. 2) Sex and age provide another demographic base of segmentation. 3) Family size or family life cycle stage. Family life cycle stages include young singles, young married with no children, families with young children, divorced, empty nesters, or seniors. 4) Occupation and education can also be used for segmentation. 5) Finally, social class—lower, middle, or upper. And ethnicity—for example: Hispanic, Asian, Native American, white, or multiracial.

Behavioral dimensions for segmenting consumer markets

-Info required -needs -benefits sought -Thoughts -Rate of use -Purchase relationship -Brand familiarity -Kind of shopping Type of problem-solving Key Issues 1) Needs—for example, customer needs could be economic, functional, or psychological. 2) Benefits sought tend to be situation specific—for example a car buyer could be looking for good gas mileage or the ability to seat seven people. 3) Thoughts—buyers may be grouped by whether they have favorable or unfavorable attitudes or beliefs about the brand or product category. 4) Rate of use—some customers may be heavy, medium, light or even non-users. 5) Purchase relationship—customers could be segmented by whether they have an ongoing relationship, intermittent use, or a bad relationship. 6) Brand familiarity—might vary from insisting on a brand to nonrecognition or rejection. 7) Kind of shopping—refers to whether buyers do comparison shopping or perhaps buy on a convenience basis. 8) Buyers might use different problem solving approaches—and could be grouped in this way. Or buyers may have different information needs—some customers want a lot of information while others need little.

Segmenting Dimensions for Business Markets

-Kind of relationship -Type of customer -Demographics -How customers will use the product -Type of buying station -Purchasing methods Among these dimensions are: 1) Kind of relationship between buyer and seller—relationships might range from weak loyalty to strong loyalty to a vendor. 2) Type of customer—customers may be segmented by whether they are service producers, a government agency, or a manufacturer. 3) Demographics variables include geographic locations, size of the company, or industry. 4) How the customer will use the product—will the product being sold be used in an installation, as a component or as a raw material. 5) Type of buying situation—some characteristics of the buying situation might include the number of people involved in the purchase or whether the buying process is centralized or decentralized. 6) Purchasing methods refer to factors like whether the buyer uses bids, vendor analysis, e-commerce websites, or other methods of buying.

Importance of market segmentation

-Markets have a variety of product needs and preferences -Marketers can better define customer needs -Decision makers can define objectives and allocate resources more accurately Ex. Coca-cola's product lines - different products marketed by company to different market segments

Personality Segmentation

-Reflects a person's traits, attitudes, and habits.

Geographic dimensions for segmenting consumer markets

-Region of world, country -Region in a country -Size of city Geographic segmentation of markets is based on the region, market size, market density (number of people within a unit of land), or climate. Consumer goods companies use a regional approach to marketing for the reasons shown on this slide.

Customer relationship management (CRM)

-Seller fine-tunes the marketing effort with information from a detailed customer database -Includes info on customers' past purchases, plus more!

Criteria for market segmentation

-Substantial(large enough?) -Identifiability & Measurability -Accessibility (must be reachable) -Responsiveness Textbook also lists: -Homogeneous (within segments) -Heteregeneous (between segments) Markets are segmented for three reasons: 1) Segmentation enables the identification of groups of customers with similar needs, and the analysis of the buying behavior of these groups. 2) Segmentation provides information for the specific matching of the design of marketing mixes with the characteristics of the segment. 3) Segmentation helps marketers satisfy customers wants and needs while meeting the organization's objectives. A segmentation scheme must produce segments that meet the four basic criteria as defined above.

Position

-The place a product occupies in consumers' minds relative to competing offerings Marketing research techniques are designed to collect information about consumer perceptions and determine differences among competing products in the mind of the consumer. Positioning assumes that consumers compare products on the basis of important features. Effective positioning requires assessing the positions occupied by competing products, determining the important dimensions underlying these positions, and choosing a position in the market where the marketing efforts will have the greatest impact Ex. P&G has a wide variety of positions in its various brands (Tide, cheer, gain, etc) Firms often use promotion to help "position" how a marketing mix meets target customers' specific needs. The Rolex ad showcases the Rolex Oyster Perpetual Sea-Dweller DEEPSEA Men's Watch. Rolex is one of the most prolific Swiss wristwatch manufacturing companies in the world. With their sheer elegance and uncompromising attention to detail, Rolex is the largest luxury watch brand worldwide.

Clustering techniques

-Try to find similar patterns within sets of data -Groups customers who are similar on their segmenting dimensions into homogeneous segments -Usually requires a computer

Gender Segmentation

-Women make 70% of consumer goods purchases annually -Many marketers of male-dominated arenas are targeting women -Increasing numbers of marketers in female dominated categories are targeting men

Two steps of segmentation

1) Naming broad product-markets 2) Segmenting markets to selecting target markets and develop marketing mixes Market segmentation is a two-step process. This process fails too often because beginners start with the whole mass market and try to find one or two demographic characteristics to divide up (segment) this market. The steps in market segmentation are: 1) Naming broad product-markets, or disaggregating. Marketers must break apart all possible needs into some generic markets and broad product-markets in which the firm may be able to profitably operate. 2) Segmenting is an aggregating process—clustering people with similar needs into a market segment. Market segment: a relatively homogeneous group of consumers who will respond to a marketing mix in a similar way.

Understanding Markets

1) What is a company's market? Market is a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods or services—that is, ways of satisfying those needs. 2) Don't just focus on the product The product oriented approach ignores customers. Customers make a market! 3) Generic markets to product-markets A generic market is a market with broadly similar needs—and sellers offering various, often diverse, ways of satisfying those needs. A product-market is a market with very similar needs and sellers offering various close substitute ways of satisfying those needs. 4) Broaden market definitions to find opportunities Broader market definitions—including both generic market definitions and product-market definitions—can help firms find opportunities. Too broad a definition makes the company's efforts and resources seem insignificant

A complete product-market definition includes:

1. Product type (generic market doesn't include this part) 2. Customer needs 3. Customer types 4. Geographic area

Best Practice Approach for Segmenting Product Markets

1. Select broad product-market 2. Identify potential customers' needs 3. Form initial homogeneous submarkets 4. Identify determining dimensions 5. Name possible product markets 6. Evaluate product-market segment behaviors 7. Estimate size of each product-market segment

Segmenters

Aim at one or more homogenous segments and try to develop a different marketing mix for each segment

Geodemographic Segmentation

Combines geographic, demographic, and lifestyle segmentation

Combined target market approach

Combining two or more submarkets into one larger target market as a basis for one strategy

Benefit segmentation

Different from other segmentation bases because it groups potential customers on the basis of their needs and wants instead of some other characteristic

80/20 Principle

Focus of marketing is often on the heavy user segment. 20% of users comprise 80% of consumption

Market

Group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods or services The term market means different things to different people. We are all familiar with the supermarket, stock market, labor market, fish market, and flea market. All these types of markets share several characteristics. Markets are composed of people or organizations with needs and wants that can be satisfied by particular product categories. They have the ability to buy the products they seek, and are willing to exchange their resources for the desired products.

Income segmentation

High income, low income, both

Ethnic segmentation

Largest ethnic markets are: -Hispanic Americans -African Americans -Asian Americans

Market Grid: Hotel Example

Market dimensions suggest a good mix: After following the seven steps, outline the kinds of marketing mixes that would appeal to the various markets. Facility use can vary between weekends and weekdays, type of traveler, and so forth. For example, consider some of the needs for family vacationers: comfort, security, privacy, family fun, child care and snacks. These customers are likely to be couples and single parents with children who wan ta fun family experience, young, active, and energetic. Compare that with the resort seeker who also wants comfort, security and privacy - suggesting these are qualifying needs while others are determining needs. Resort seekers also want relaxation - perhaps with golf, and a hot tub, also fine dining, fun and concierge services to arrange for theater or touring possibilities. These customers are sophisticated adults who have time to relax and seek adult fun. They also have discretionary income. Improve the marketing mix for current customers: There are several approaches provide a basis for identifying new ways to serve existing customers and strengthen the relationship with them. Technology can make old services and strategies stagnate; the need for reevaluation is constant. Targeting a segment of one: Many luxury hotel chains adapt a marketing mix to an individual customer. First-time guests' personal preferences are saved in a database for future visits.

Generic market

Market with broadly similar needs, and sellers offering various, often diverse, ways of satisfying those needs. -Ex. someone wants to take photos on a trip, they might use a phone camera, post cards, or a digital camera.

Product market

Market with very similar needs and sellers offering various close substitute ways of satisfying those needs -Ex. Nikon, Canon, Kodak all competing to sell digital cameras

Qualifying dimensions

Relevant to including a customer type in a product-market (basically the bare minimum, like needing a license to purchase a car)

Narrowing down to target markets

See figure 4-3 in textbook 1) All customer needs: Marketers should break apart or disaggregate all customer needs. 2) Generic market: a market with broadly similar needs and sellers offering various ways of satisfying those needs. 3) Defining the market broadly can help the marketer to uncover some potential new opportunities. The marketer can then narrow down to specific product-markets. 4) Product-market: a market with very similar needs and sellers offering various close substitute ways of satisfying those needs. 5) Segmenting: the next step is an aggregating process—the marketer groups together people with similar needs into a market segment. Here we look for similarities.

Multiple target market approach

Segmenting the market and choosing two or more segments, and then treating each as a separate target market needing a different marketing mix

Single target market approach

Segmenting the market and picking one of the homogenous segments as the firm's target market

Family Life Cycle (FLC)

Series of stages determined by a combination of age, marital status, and the presence or absence of children Consumption patterns among people of the same age and gender differ because they are in different stages of the family life cycle stage. The FLC is a series of stages determined by a combination of age, marital status, and the presence or absence of children.

Determining dimensions

Those that actually affect the customer's purchase of a specific product or brand in a product-market (not only having a license but WANTING to buy a car)

Combiners

Try to increase the size of their target markers by combining two or more segments

Product Space

Two attributes of soap that account for the greatest difference in consumer perceptions: 1) degree to which the soap is a deodorant soap. 2) degree to which the soap is a moisturizing soap. The closer that any two dots are to each other, the more similar those brands are in the minds of consumers. Each segment may have its own preferences. The circles refer to the size of market attracted to a combination of attributes. Positioning may also lead to combining instead of segmenting, if a firm can successfully appeal to several segments with the same product. Therefore, positioning studies can be part of a broader analysis because they: 1) identify important attributes of the product offerings in a market; 2) identify what offerings are likely to appeal to segments; 3) provide a basis for changing the marketing mix, should a marketer decide to reposition a product.

Market segmentation

Two step process: 1) naming broad product markets 2)segmenting these broad product markets to select target markets and develop suitable marketing mixes Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed by the company to different market segments.

Usage-rate segmentation

heavy, medium, light users Segmenting by usage rate enables marketers to focus efforts on heavy users or to develop multiple marketing mixes aimed at different segments. What programs do companies use to develop customers into heavy users? The list should include airline frequent flyer programs and in-store coupon dispensing.

Market segment

homogeneous group of customers who will respond to a marketing mix in a similar way