CHAPTER THREE Focusing Marketing Strategy with Segmentation and Positioning For use only with Perreault and McCarthy texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin www.mhhe.com/fourps When we finish this lecture you should 1. Know about defining generic markets and product-markets. 2. Know what market segmentation is and how to segment product-markets into submarkets. 3. Know three approaches to market-oriented strategy planning. 4. Know dimensions that may be useful for segmenting markets. 5. Know a seven-step approach to market segmentation that you can do yourself. 6. Know what positioning is--and why it is useful. © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Taking Advantage of Opportunities + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3-2 Search for Opportunities Can Begin by Understanding Markets Selecting target marketing approach Narrowing down to specific product-market All customer needs Some generic market One broad productmarket Segmenting into possible target markets Single target market approach Homogeneous (narrow) productmarkets Multiple target market approach Combined target market approach © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Naming Product Markets and Generic Markets Customer Needs Product Type Product-Market Definition Geographic Area Customer Type No Product Type in Generic Market Definition © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Interactive Exercise: Product-Market Definition © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Is the Product-Market? © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3-3 Market Segmentation Defines Possible Target Markets Broad product-market (or generic market) name goes here (The bicycle-riders product-market) Submarket 1 (Exercisers) Submarket 2 (Off-road adventurers) Submarket 3 (Transportation riders) Submarket 4 (Socializers) Submarket 5 (Environmentalists) © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3-4 How Far Should the Aggregating Go? Status dimension B. Product-market showing A. six segments three segments Dependability dimension © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3-5 Target Marketers Aim at Specific Targets In a product-market area A segmenter Using single target market approach – can aim at one submarket with one marketing mix Using multiple target market approach – can aim at two or more submarkets with different marketing mixes © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A combiner Using combined target market approach – can aim at two or more submarkets with the same marketing mix Segmenting vs. Combining Profit Is the Balancing Point Combiners Try to Satisfy “Pretty Well” Too Much Combining Is Risky Key Issues Segment or Combine? Segmenting May Produce Bigger Sales © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmenters Try to Satisfy “Very Well” What Dimensions Are Used to Segment Markets? Qualifying Dimensions Determining Dimensions • Relevant to including a customer type in a product market • Help identify “core features” OR • Affect the customer’s purchase of a product or brand • Can be further segmented © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Are the Relevant Segmenting Dimensions? + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Determining vs. Qualifying Dimensions Determining Dimensions May Be Very Specific Determining Dimensions May Change Key Issues Different Dimensions For Different Submarkets Qualifying Dimensions Are Important Too © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Broader Issues in Selecting Segmenting Dimensions Ethical Issues Exploitation Creates Unnecessary Wants Does Harm © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmentation and Advertising © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Business-to-Business Segmentation + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmenting Product Markets Name Broad Product-Market List Customer Needs Form Homogeneous Submarkets Identify Determining Dimensions Process for Segmenting Product-Markets Name Possible Product-Markets Evaluate Product-Market Segments Estimate Size of Product-Market Segments © 2004 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin More Sophisticated Techniques May Help in Segmenting Clustering Customer Database Customer Relationship Management (CRM) © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Cluster Analysis + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Positioning + © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Exhibit 3-12 An Example of Positioning High moisturizing 4 7 Tone Zest Lever 2000 Dove 5 Nondeodorant 2 Lux Coast Safeguard 8 Deodorant 3 1 Dial Lifebuoy Lava 6 low moisturizing © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Key Terms • Market • Generic market • Product market • Market segmentation • Segmenting • Market segment • Single target market • • approach Multiple target market approach Combined target market approach • Combiners • Segmenters • Qualifying dimensions • Determining dimensions • Clustering techniques • Customer relationship • management (CRM) Positioning © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin