The process of segmenting and targeting connects marketing actions to Identification of marketing needs Identify Market Needs Steps in Segmenting & Target Markets •Form prospective buyers into segments •Form products to be sold into groups •Develop a market-product grid and Estimate size of markets •Select target markets •Take marketing actions to reach target markets Execute Marketing Program

Market product grid showing Reebok reaches customers with different needs

MARKET SEGMENT GENERAL GROUP W/ NEED RUNNING AEROBIC (1981) (1982) TENNIS (1984) PRODUCT (Kind of Shoes) BASKET BALL (1984) CHILDREN'S (1984) WALKING (1986) CROSS TRAINERS STEP-TRAINERS (1988) (1991) Runners Aerobic Dancers

P P P P

Tennis Players Basketball Players Step

P P P P S P

Style Conscious Walkers Children

S S S S S S S S P Key: P = Primary Market; S = Secondary Market S P S P

Advertising actions to reach specific student segments

Markets Dormitory Students Apartment Students Day Commuter Students Night Commuter Students

Ads in buses: flyers under windshield wipers of cars in parking lots

Lunch

S L L 0

Meal Snacks

L L M S

Dinner

0 S S L

After Dinner Snacks

L S O M Ad campaign: “Ten percent off all purchases between 2-4:30PM during winter quarter Ad on flyer under windshield wipers of cars in night parking lots: “Free Frosty with this coupon when you buy a hamburger with fries.

Selecting a target market for your fast-food restaurant next to metropolitan college. Target market is shaded.

Markets STUDENTS Dormitory Apartment Day Commuter Night Commuter Breakfast

0 S 0 0

Lunch

S L L 0

Meal Snacks

L L M S

Dinner

0 S S L

NON-STUDENTS Faculty or staff Live in area Work in area

0 0 S L S L S M 0 S M S Key: L, Large Market; M, Medium Market; S, Small Market; 0, No Market

After Dinner Snacks

L S O M 0 S 0

Market-product grid showing size of markets for pillows for three different segments of sleepers

MARKET

Stomache Sleepers Back Sleepers Side Sleepers

SOFT PILLOW

L M S

MEDIUM PILLOW

M L M Key: L, Large Market; M, Medium Market; S, Small Market

FIRM PILLOW

S M L

Market Segmentation

1.

Def. Classification of prospective buyers into homogeneous groups from the twofold perspective of: a) Common needs b) Common response to marketing actions 2.

Classification of Consumer Markets a) Homogeneous b) Diffused c) Clusters

3.

Criteria for Segmenting Consumer Markets a) Geographic b) Demographic c) Psychological d) Behavioral - Occasions - Benefits sought e) User Status f) Usage Rate g) Loyalty Status h) Attitude

4.

5.

Market Coverage Strategies a) Undifferentiated Marketing b) Differentiated Marketing c) Concentrated Marketing Seven Criteria For Selecting A Marketing Strategy a) Company Resources b) Product Homogeneity c) Product Stage in Life Cycle d) Market Homogeneity e) Competitive Marketing Strategies f) Feasibility of Marketing Programs g) Profits

Positioning

Def. All of the organization’s actions associated with designing a product and creating an image so that it occupies a unique place in the customer’s mind, vis-à vis competitive products. Should be sustained and profitable.

Six Positioning Strategies: 1) Attribute 2) Use 3) User 4) Product Class 5) Competitors 6) Price and Quality

ATTRIBUTES

Attribute Segmentation Toothpaste Marketing Segments

Children Teens-Young Adults Family Adults Flavor Color Whiteness Fresh Breath Decay Prevention Plaque Removal Stain Removal Gingivitis Price

X X X X X X X X X X Brands Aim, Stripe Ultra Brite, McCleans, Pearl Drops, Rembrandt Colgate, Crest, Total Topol, Mentadent, Total, Rembrandt

1.

2.

Branding

Five Options: a) Multi-Product Branding b) Multi-Mix Branding c) Multi-Branding d) Private-Branding e) Co-Branding Growth Strategies a) Line Extensions b) Brand Extension c) Flanker Brand Extension d) Fighting Brand

Product Differentiation

Product Services Personnel Channel • Insert • Features Ordering Ease Delivery • Performance Installation Competence Coverage Courtesy • Durability Customer Training Reliability • Reliability Customer Consulting Responsiveness Expertise Credibility Performance • RepairabilityMaintenance/Repair • Style Misc.

Communication • Design

IMAGE

• Symbols • Media • Atmosphere • Events

1.

2.

3.

4.

5.

I. Product

Form: Size, Shape, Physical structure of product.

Ex. Aspirin; Dosage, Size, Shape, Coating, Action time, Etc.

Features: -Co. Cost vs. Customer Value - Bundles or packages vs. Simple Add-Ons Quality - SPI finds: ROI = +f(quality) - Promotes customer loyalty Ex: Schlltz: increase SR cut aging time,used less expensive hops Result: SR ¶ increases, Stock price increases, but LR market share decreases & so did ¶ & stock prices Durability: Generally advantageous Exception: Products subject to fast technology Obsolescence (e.g., Computers, Video cameras) Repaiability: - Before GE sends a repair person, they try to fix it over the phone - Cisco Systems eliminated 50,000 calls a month by posting solutions on its Web Site to frequently asked questions (FAQ)

6.

7.

Style -Eye-catching or Yawn producing Ex. Apple computers; Montblanc Pens, Godiva chocolate, H-D, Arizona ice tea bottle Design - The totality of features that affect how the product looks & performs.

Ex. Apple’s IMAC - One button internet access - No clunky tower or desktop hard drive - No floppy disk drive Global Trade: - Italians: Apparel, Furniture - Scandinavians: Design for functionality, aesthetics, environment - e.g., Braun ( a division of Gillette), Shavers, Coffeemakers, Hair dryers, Food processors

II. Services

1.

2.

3.

Ordering EASE

Ex. Internet Food Service Firms Peapod Streamline Net Grocer Cyber-meals

Maintenance/Repair

Ex. Tandem computers Makes parallel CPUs Uses remote diagnostics to monitor & walks the customer over the phone as to needed replacement parts & repair

Misc.

Improved warranty or maintenance contract.

III. Personal Diff.

– McD’s: Courteous staff (Prior to 1995) – IBM: Professionals – Disney: Upbeat Ex. GE, Frito-Lay, Cisco, Pfizer have excellent sales staff

IV. Channel Ex. • Catepillar: Construction Equipment

• More dalers than its competitors & in good locations • Well trained

• Dell & Avon

• Direct marketing channels Lams Pet Food – Ignored traditional channels (large chains) and went to regional vets, breeders and pet stores – Sales 1982 1996 16M 500M

V. IMAGE

: Customer perception of product or co .

Ex. Nike: A shoe is an attribute Airwalk: Extreme sports, Image to kids Symbols: • • • • • • • Apple Lion (Harris Bank) Passion (E. Taylor) Uninhibited (Cher) Blue (IBM) Yellow (Kodak) Red (Campbell Soup ) Media: Chosen image has to be worked into Ads, news reports, brochures, annual reports, bus. cards, etc Atmosphere: Physical spaces occupied by a company • • Hyatt Regency: Atrium lobbies Bank Buildings must convey an image of safety Events: Sponsorship • • • AT&T and IBM: sponsor symphony performance and art exhibits Heinz gives money to hospitals Kraft donates to MADD

Stages of Competitive Cycle

Market Share Production Costs Price Premium Sole Supplier Competitive Entry Share Stability Commodity Competition Withdrawal