INTRODUCTION TO MARKETING
NOV 16, 2023
PROF. DARIA DZYABURA
1
Plan for today
• Data fusion & New product development (from last time)
• Marketing Decision Framework
• Segmentation, Targeting and Positioning
• Case Analysis Guidelines
• Calyx Flowers
Regression results
Attribute
Color
Size
Price
Strap pad
Water bottle
Interior
Intercept
Level
Online Partworth Offline Partworth
How would
you test for
significance?
Difference
Reflective
Colorful
Blue
Black
Large
Small
-0.31**
-1.06**
-0.22**
-0.60**
-0.71**
-0.11
-0.28*
0.36**
-0.12
0.27**
-0.31**
-0.58**
$120 – $180
-0.22**
Yes
No
Yes
No
Divider for
files
Laptop
sleeve
No dividers
0.51**
-0.15**
0.25**
0.06**
-0.26**
0.45**
0.17**
-0.28**
0.52**
0.11
0.88**
0.26**
3.39**
-0.33
0.41**
0.62**
3.72**
Questions
• Which partworths should firms rely on to design products?
• Which partworths are the “true” utility (consumption
utility)?
• What is causing the change?
• If offline is correct, how do we collect data in a cost
efficient way?
• Marginal cost per participant: ~$1 online, ~$30-$50
offline
Data Fusion
• Measuring what we want is costly
• But we can get cheap measurements of something that is
correlated with what we want
• In this case, collect a small sample of people who
complete BOTH online and offline tasks
Training Sample
Online
Prediction sample
Data used for estimation
Offline
Dzyabura, Jagabathula, Muller, 2019, Marketing Science
Data Fusion
• Measuring what we want is costly
• But we can get cheap measurements of something that is
correlated with what we want
• In this case, collect a small sample of people who
complete BOTH online and offline tasks
• Two ways to merge the data:
• Machine learning (k-nearest neighbors)
• Classical statistics (mixed effects model)
Dzyabura, Jagabathula, Muller, 2019, Marketing Science
k-Nearest Neighbors
• For an online respondent, find the closest offline
respondents in the sample who completed both (distance
measured on online partworths)
• Estimate his offline partworths as a weighted average of
their offline partworths
Random coefficients models
•
Idea: we need to jointly estimate a model with these two data
sets, that allows for correlation between parameters
•
Used when need individual-level estimates, but not enough
data for each consumer
•
Model population level parameters: normal distribution
•
Estimate beta, mu, Sigma with maximum likelihood
•
Hierarchical Bayesian methods for choice models
Data fusion for online/offline
preferences using random coefficient
models
• Assume that online and offline partworths are drawn from
a joint multivariate normal distribution
• The correlation matrices capture relationship between
online and offline preferences
Which do you think works
better?
• k-NN predicts individual choices better, but…
• Mixed effects model predicts market shares better
• What kind of metrics do you want to see?
Plan for today
• Data fusion & New product development (from last time)
• Marketing Decision Framework
• Segmentation, Targeting and Positioning
• Case Analysis Guidelines
• Calyx Flowers
WHAT IS A PRODUCT?
Product: Anything that can be offered to a market for attention,
acquisition, or consumption that satisfies a need.
Can be a physical object, service, person, place, organization, idea, or
a combination
12
LEVELS OF A PRODUCT
Installation
Augmented product
Packagin
g
Actual product
Brand
name
Features
Core
benefit
or
service
Delivery
and
credit
Quality
level
Core product
Aftersale
service
Design
Warranty
13
WHAT IS THE CUSTOMER REALLY
BUYING?
•
Core Customer Value:
This is the need that they are having met / the
benefit they seek e.g. children’s fever reducing
medication
•
Actual Product: Tangible Attributes &
Features
Brand name, packaging, design, flavor
•
Augmented Product: Enhancements
Services, customer support, warranty, training,
etc.
14
WHY INTRODUCE NEW PRODUCTS
•
Offensive
•
Achieve market share or profit goals
•
New products usually have higher price premium
•
Products under 5 years old contribute 28% revenue
•
Develop “resources”:
•
Complement with existing products → customer loyalty
15
WHY INTRODUCE NEW PRODUCTS
•
Defensive
•
Replace declining products
16
STAGES OF THE PRODUCT LIFECYCLE
The Effect of
Innovations
Sales
Typical Path
Time
17
INNOVATION IS RISKY
• Much of new products introduced to market fail
• Only 1 in 7 new product ideas commercialized
• Increasing order of risk
• Repositioning
• Product improvement
• Additions to product line
• New category entries
• New to the world products
• BUT without innovation, new firms never live and existing
firms die
18
CUSTOMER NEEDS VS PRODUCT
ATTRIBUTES
•
Customer does not need an 8mm drill – he needs an 8mm hole!
•
If I had asked people what they wanted, they would have said a faster
horse
•
•
To the customer: a bundle of benefits
To the firm: a bundle of attributes
19
Plan for today
• Data fusion (from last time)
• Marketing Decision Framework
• Segmentation, Targeting and Positioning
• Case Analysis Guidelines
• Calyx Flowers
Promotion
vs.
22
Product /Packaging
23
Place
vs.
24
Price
vs.
25
OVERARCHING FRAMEWORK
Product
Price
Promotion
Place
Distributio
n
TACTICS
26
“Marketing Mix” – 4Ps
• Product
• Price
• Promotion
• Place
• Come together to execute a positioning
27
POSITIONING
▪ How should our product be perceived and remembered by
customers?
▪ Image in the customer’s mind
▪ NOT a list of all product features
28
EXAMPLES OF POSITIONING
29
Positioning of Bob Chocolate?
30
Examples of Positioning
“Breakfast of
Champions”
“If it's got to be
clean, it's got to be
Tide”
31
“It’s everywhere you
want to be”
Marketing Strategy
• Who are our target customers?
• What is our value proposition to them?
32
STRATEGY VS. TACTICS
▪
▪
▪
Strategy: overarching plan to achieve an objective
Tactics: actions taken to support the strategy
Strategy and Tactics are complementary:
▪ Strategies give tactics a purpose and direction
▪ Tactics convert strategies into actions and results
“Vision without action is a daydream. Action without vision is
a nightmare”
Japanese proverb
33
Defining Marketing Strategy
Customers differ on…
• Their love for chocolate
• Their love for coffee
• Income levels
• Lifestyles
• Shopping behaviors
•…
Who should we target?
Develop positioning for the target market
34
OVERARCHING FRAMEWORK
Segmentation
Product
Targeting
Price
Promotion
Positioning
Place
Distributio
n
STRATEGY
TACTICS
35
STRATEGY (TODAY)
▪
Segmentation
What customer groups are there within the market?
Identifying groups with similar needs
▪
Targeting
What market segment is the best match for us?
Which groups are we better off ignoring?
▪
Positioning
How will you communicate your value proposition?
A clear simple statement of the benefits of your offering
36
DEVELOPING A STRATEGY
▪
Understanding potential customers
▪
Knowing what you can and cannot do
▪
Knowing your competitors
Your Value
Proposition
37
OVERARCHING FRAMEWORK
Customer
Company
ANALYSIS
Competition
Segmentation
Product
Targeting
Price
Promotion
Positioning
Place
Distributio
n
STRATEGY
TACTICS
38
WHO ARE THE COMPETITORS OF…
Ultrasound turns clothes
"ultraclean”
SANYO Introduces
the World’s First
Zero-Detergent
Electrolyzed Water
Cleaning Powered
Washing Machine
39
DEFINITION(S)
• Competitor: Any company that seeks to satisfy the same
needs that you do
or
• Any company that requires the same things from customers
that you do (uses up the same resources)
40
LEVELS OF COMPETITION
•
Form (Similar Product)
•
Category (Concrete Need)
•
General (Abstract Need)
•
Resource: Budget, Time, etc.
41
IMPLICATIONS FOR STRATEGY
Level of Competition
Product management
task
Product form
Convince customers our
brand is better than others
Product category
Convince customers that the
product form is the best in
the category
Generic
Convince customers that the
product category is the best
way to satisfy need
Resource
Convince customers that the
benefit is the best way to
spend their resources
42
Case Write-up Guidelines
• First case: Calyx Flowers
• Group write up due Thursday Nov 22
• I recommend you read the case soon
• Case analysis suggestions
• Segmentation, Targeting Positioning (this lecture) will be
helpful
43
Calyx Flowers Write-up
• Executive summary – state your conclusions and
recommendations (SHORT!)
• Problem/Issue/Situation Analysis using 3C’s
• Strategy (STP)
• Recommendation and Implementation
• Propose best alternative
• Provide rationale and implementation plan
44
SITUATIONAL ANALYSIS
Customers
– Who are they?
– How and why do they use the product?
– How do they make decisions?
– What attributes of the product do they care about?
– Do we have a product that meets a need and delivers value? To
whom? What is that value?
– What are the broad trends in society that affect our customers?
45
SITUATIONAL ANALYSIS
Company
– What are the strengths and weaknesses?
– What are our strategic assets and/or core competencies?
– Are we making/losing money?
– What is the public perception of our company?
46
SITUATIONAL ANALYSIS
Competitors
– Who are the competitors?
– What are they good/bad at?
– What is their “personality”?
– What are their goals?
– How does their product do relative to ours?
– How are competitors likely to react to our moves?
– What future competitors may emerge?
47
TACTICS COME TOGETHER TO CREATE VALUE
PROPOSITION TO TARGET CUSTOMERS
Product
Promotion
Variety
Quality
Design
Features
Packaging
Services
Advertising
Website
Social media
presence
Personal selling
Public relations
▪
Target
Audience
▪ Intended
value
proposition
Price
Retail Price
Wholesale price
Discounts
Pricing scheme
Place
(Distribution)
Channels
Locations
Inventory
48
Reading cases
Read once:
• General impressions
• Figure out what is the specific problem
• Figure out what is the decision to be made
Reread with case questions in mind
• Do any calculations necessary to answer the problem
49
Calyx Flowers Write-up
• 2 pages double spaced
• Focus on quality, not quantity!
• Writing: the simpler the better. Bullet points is fine.
50
OVERARCHING FRAMEWORK
Customer
Company
ANALYSIS
Competition
Segmentation
Product
Targeting
Price
Promotion
Positioning
Place
Distributio
n
STRATEGY
TACTICS
51
Marketing: Who is it for?
Tailoring your marketing to
highlight important attributes for
each potential consumer
Ford’s Model T: “It’s the car for
every purse and every purpose”
52
Customer 1
Customer 1
Offering A
Customer 1
Customer 2
Offering B
Customer 2
Customer 3
Customer 3
Offering C
Customer 3
Customer 4
Customer 4
Offering D
Customer 4
Customer 5
Offering E
Customer 5
Customer 6
Offering F
Customer 6
Customer 2
Offering
Customer 5
Offering A
Offering B
Customer 6
Mass marketing
Segment-based marketing
53
One-to-one marketing
Mass Marketing
Ford’s Model T: “It’s the car for every purse and
every purpose”
54
One- to-one marketing
55
When is Mass Marketing
Appropriate/Effective?
• Goods are scarce or a commodity
• Goods can sell themselves
• Consumers have (virtually) the same needs
• Little to no competition
56
Targeted Marketing
• An alternative to mass marketing
• Involves three key steps:
•
Segmenting the market (“S”)
•
Choosing the target segment(s) that are right for you (“T”)
•
Positioning the product for a chosen target segment (“P”)
Benefits of STP
To the Firm …
To the Customer …
• Identification of valuable
• Customized products &
• Efficiency in marketing
• Relevant promotions
customer segment(s)
services
communications
• Personalized and efficient
• Higher customer lifetime
interactions with firm
value
Increased Profit
58
Higher Satisfaction
Segmentation
•
Definition: grouping consumers by some criteria, such that those
within a group will respond similarly to a marketing action and
those in a different group will respond differently.
•
Alternatively, marketing segmentation is a marketing strategy that
involves dividing a broad target market into subsets of consumers
who have common needs and application for the relevant goods
and services.
•
A study done by Harvard Business claimed that in the US, 85% of
30,000 new product launches failed because of poor market
segmentation.
59
Segmentation
60
Segmentation
Dove “Real Beauty” campaign
62
Some Potential Segmentation
Variables for Shampoo
•
•
•
•
Demographics: Race/ethnicity, age, income
Hair Type: curly/straight, color (blond, brunette, redhead)
Problem hair: dandruff, oily, dry, color-treated, lice, thin/limp
Involvement: do they care about hair products? Willing to
spend a lot on hair products?
•
•
Activities: Runners, Swimmers, Travelers
Location: L.A. (sun damage and hard water) versus New
York (dry winter and humid summer)
•
Personality: Eco-friendly, anti animal cruelty, “real beauty”
63
More generally…
• Geography
– nations, states, regions, cities, urbanrural, other.
• Demographics
– Age, Gender, family size, life cycle,
income, education
• Psychographic
– Social class, lifestyle, personality
• Behavioral
– Occasions, benefits, uses, responses
64
Segmentation
• Definition: grouping consumers by some criteria, such
that those within a group will respond similarly to a
marketing action and those in a different group will
respond differently.
65
Market Segmentation Strategies
Non-segmented
market
Segmentation I
Segmentation II
66
Segmentation III
Characteristics of Good Segmentation
• Separating prospective buyers into groups such that
• within a group:
• Similarity is high
• Needs are common
• Responses to marketing action are similar
• between groups:
• Similarity is low
• Needs are different
• Responses to marketing action are different
•
Segments should be:
• Large Enough
• Identifiable
• Distinctive
• Stable
67
STP Simulation
Product: Home Pregnancy Tests
68
The Early Pregnancy Test Market
“Walk into an Osco drugstore, and on a shelf near the ovulation testing kits you’ll find
Conceive brand pregnancy tests. A cherubic infant smiles at you from the pink box
…….
A little farther down the aisle, and near the condoms, you’ll find another pregnancy
test, called RapidVue. The package features no smiling baby, just brick-red lettering
against a mauve background.
Both tests are products of San Diego-based Quidel Corp. -- and they are identical
except for the packaging.”
(Forbes, August 29, 1994, p 78)
Segmenting the Early Pregnancy Test Market
Brand Name
Price
Packaging
Shelf
Position
70
Segmenting the Early Pregnancy Test Market:
Desired Outcome
Brand Name
Price
Packaging
Shelf
Position
The hopefuls
The fearfuls
Conceive
RapidVue
$9.99
$6.99
Pink box,
smiling baby
Mauve
background,
no baby
Near ovulationtesting kits
Near condoms
71
Segmenting the Early Pregnancy Test Market:
Desired Outcome
Brand Name
Price
Packaging
Shelf
Position
The hopefuls
The fearfuls
Conceive
RapidVue
$9.99
$6.99
Pink box,
smiling baby
Mauve
background,
no baby
Near ovulationtesting kits
Near condoms
72
Targeting
• Definition: identifying which customers to
serve and which to ignore
73
Targeting
Segment A
Segment B
Segment C
Evaluating Market Segments
• Segment Characterstics (“Customer”)
• The segment must offer long term revenue potential
(consider segment size, growth, buying power, loyalty)
• Segment must be cost-efficient to reach
• Competitive advantage
• What is the level of competition in the segment?
• The company must be able to serve the segment better than
its competitors
• Segment compatibility
• The segment must be compatible with the company’s core
competency, brand image, and goals
75
An Ideal Segment
•
•
•
•
•
•
Large, Growing
Stable
Accessible
Profitable:
• High barriers to entry and Low exit barriers, Low regulation,
• Low competitive intensity, high Willingness To Pay (WTP)
With Unmet Needs
Where you have a competitive advantage
• Synergistic
76
New York Times
Jan 16, 2007
Tactical Targeting Scenarios
“Sniper” targeting
(perfect fit)
“Shotgun” targeting
(broad)
Oversegmentation
(narrow)
Likely to buy product(unobservable)
Targeted (observable)
© 2006 Alexander
Chernev
Shot-in-the-dark
(misaligned)
Example of Oversegmentation
79
Multiple Needs
80
Multiple products, multiple
segments
82
Multiple products, multiple
segments
83
Multiple products, multiple
segments
84
Who: Geographic Segmentation
85
One product, multiple segments
86
Zipcar: multiple segments, one
product
87
Pepperidge Farm: multiple
products, one segment
88
Multiple Products, One Segment
89
Targeting Multiple Segments
One
Product
Multiple Target
Segments
- Himalayan Salt
- Tom’s of Maine
- Botox
- Zipcar
- Starwars
- Hybrid Cars
Multiple
Product
One Target
Segment
- Music
- Lego
- Ben & Jerry’s
- BMW, Mini
- Colgate
90
Positioning
• View of how our offering should be perceived and
remembered by customers
• Process of creating a distinct image in the customer’s
mind
91
Example: Emergen-C vs.
Airborne
92
Positioning Tool: Perceptual Map
94
Positioning strategies
More/
Smaller/
Cheaper/
Faster/
Vertical
positioning
Horizontal
positioning
Different/
Lifestyle/
97
Vertical positioning
The Razor Battle
Gillette ups the ante, unveils 5-blade razor
98
Razors: Horizontal Differentiation
• DollarShaveClub
99
Wii
10
Developing a Positioning Strategy:
Guiding Questions
❑Which positions are of greatest value to our target customers,
given their needs?
❑Which of these positions are “taken,” and which positions are
relatively free of competition?
❑Which of the available positions fits best with our objectives and
our distinctive capabilities, i.e., can we back up the chosen
positioning by demonstrable product attributes or benefits?
❑Can we “change the rules” of the game by discovering new critical
points of differentiation?
❑Are all our positioning messages consistent?
10
For next time
Calyx writeup
Think about project topic