Chapter 6 Segmentation, Targeting, & Positioning: Building the Right Relationships with the Right Customers

Professor Marshall Queens College

P&Gs Story
Laundry Detergent Soap Shampoo Dishwashing Detergent Tissue Deodorant
Tide, Cheer, Bold, Gain, Era, Dreft, Febreeze, Ivory Snow
Ivory, Safeguard, Camay, Olay, Zest, Old Spice

Pantene, Pert, Head & Shoulders, Vidal Sassoon

Dawn, Ivory, Joy, Cascade Charmin, Bounty, Puffs Secret, Sure, Old Spice

Why does P&G compete with itself?

Why do they produce brands that compete against one another? Why not focus on one leading brand? Answer: Different people want different mixes of benefits from the products they buy. People prioritize the benefits that they want from each type of product. Laundry Detergent brand positioning: Tide: all purpose family detergent tough on greasy stains Cheer: color expert prevents fading Bold: built-in fabric softener Gain: detergent that gives you fresh smelling clothes Era: power tool for stain removing and pretreating Ivory Snow: mild cleansing benefits for a pure and simple clean Dreft: helps remove tough baby stains pediatrician recommended

Even Narrower Niches

Tide with Bleach Tide Liquid with Bleach Alternative Tide High Efficiency Tide Clean Breeze Tide Mountain Spring Tide Free Tide Rapid Action Tablets

P&G Results
Tide captures 38% of the market share All P&G brands of laundry detergent capture 60% of the market share Much more than any one brand could capture on its own!

Steps in Target Marketing

Market Segmentation Identify bases for segmenting the market Develop segment profiles Target marketing Develop measure of segment attractiveness Select target segments Market Positioning Develop positioning for target segments Develop a marketing mix for each segment

Market Segmentation
Divide large heterogeneous markets into smaller segments that can be reach more efficiently with products or services that meet their unique needs. Geographic:
World region or country Region of country City or metro size Density or climate

Examples: Campbell sells Cajun gumbo soup in Louisiana and Mississippi Localized versions of the game Monopoly for Chicago, New York, Las Vegas

Market Segmentation
Demographic:

Age, gender, family size, income, occupation, etc. The most popular bases for segmenting customer groups because customer needs, wants, and usage rates change very closely with demographic variables. Easier to measure than most other types of variables.

Market Segmentation
Age and Life-Cycle Stage

Example: P&G has different toothpastes for different age groups. Avoid stereotypes in promotions Promote positive messages

Example: Gap has different stores: Baby Gap, Gap Maternity, Gap kids, in addition to The Gap.

Market Segmentation
Gender

Women make 90% of home improvement decisions. Women influence 80% of all household consumer purchases.

Example: Products geared toward women: clothing, toiletries, magazines, Oxygen television network.

Market Segmentation
Income

Identifies and targets the affluent for luxury goods. People with low annual incomes can be a lucrative market. Some manufacturers have different grades of products for different markets.

Lexus verses Hyndai

Family Dollar targets lower income

Tiffanys targets the affluent

Market Segmentation
Psychographic
Social class Lifestyle Personality

Market Segmentation
Behavioral
Occasions:
Special promotions and labels for holidays.
(e.g., Hershey Kisses)

Special products for special occasions.

(e.g., Kodak disposable cameras)

Some holidays, such as Mothers Day and Fathers Day were promoted to increase the sale of candy, cards, flowers, and gifts.

Market Segmentation
Behavioral
Benefits Sought:
Different segments desire different benefits from products.
(e.g., P&Gs multiple brands of laundry detergents to satisfy different needs in the product category)

Market Segmentation
Behavioral
User Status: Nonusers, ex-users, potential users, first-time users, regular users Usage Rate: Light, medium, heavy Loyalty Status: Brands, stores, companies

Market Segmentation
Best to use multiple approaches in order to identify smaller, better-defined target groups. Start with a single base and then expand to other bases.

Example: a bank may target wealthy retirees and they would further segment them into groups based on savings preferences, risk preferences, income, and lifestyle.

Market Segmentation
Geodemographic
Claritas, Inc. Potential Rating Index for Zip Markets (PRIZM) Based on U.S. Census data Profiles on 260,000 U.S. neighborhoods 62 clusters or types

Claritas (marketing research company) geodemographic research: http://www.usatoday.com/news/graphics/whoweare/flash.htm Zip Code lookup for lifestyle breakdown: http://www.clusterbigip1.claritas.com/MyBestSegments/Default.jsp?ID=20

Segmenting Business Markets

Consumer and business markets use many of the same variables for segmentation. Business marketers can also use:
Operating Characteristics Purchasing Approaches Situational Factors Personal Characteristics

Segmenting International Markets

Factors Used:
Geographic location Economic factors Political and legal factors Cultural factors

Intermarket Segmentation forming segments who have similar needs and buying behavior even though they are located in different countries.
Example: Coca-Cola has different types of soft drinks for many of the countries where they are present. Flavors include: fruity Fanta Kolita from Costa Rica, non-carbonated, sour cherry Cappy from the Czech Republic, and a very bitter Beverly from Italy, among many others.

Requirements for Effective Segmentation

There are many ways to segment a market, but not all segmentations are effective. Buyers of sugar could be divided up by hair color. But obviously, hair color does not impact the purchasing decision for this product.

Measurable size, purchasing power, profiles of the segments can be measured. Accessible segments can be reached and served Substantial segments are large or profitable enough Differentiable segments are distinguishable and respond differently to marketing mix elements and programs Actionable effective programs can be designed for attracting and serving the segments.

Evaluating Market Segments

Segment Size and Growth
Analyze current segment sales, growth rates, and expected profitability.

Segment Structural Attractiveness

Consider effects of: competitors (how aggressive are they?), existence of substitute products (do they limit prices?), and the power of buyers & suppliers (bargaining power).

Company Objectives and Resources

Examine company skills & resources needed to succeed in that segment. Offer superior value & gain advantages over competitors.

Selecting Target Segments

Undifferentiated Mass Marketing Differentiated Segmented Marketing Concentrated Niche Marketing Micromarketing Local or individual marketing Targeting Narrowly

Targeting Broadly Goes after a small share of a large market.

Appealing when resources are limited. Goes after a large share of one or a few segments or niches.

Micromarketing
Tailoring products and marketing programs to suit the tastes of specific individuals and locations.
Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groupscities, neighborhoods, specific stores. Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. Also called one-to-one, or customized marketing.

Imagine walking through an airport and seeing digital billboards which call out to you, by name. This is individual marketing. Its the ultimate extreme in target marketing.

Choosing a Market Coverage Strategy

Factors to Consider
Company resources limited resources warrant some sort of concentrated marketing Product variability uniform products (milk, eggs) lend themselves best to undifferentiated marketing Products life-cycle stage in the mature stage, differentiated marketing makes the most sense Market variability if most buyers have the same taste, react the same way, and buy the same amounts, undifferentiated marketing is best. Competitors marketing strategies if competitors use differentiated, you should also use differentiated. If competitors use undifferentiated, you should use differentiated or concentrated marketing to gain an advantage.

Socially Responsible Marketing

Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern.
Vulnerable and disadvantaged can be targeted. Cereal, cigarette, beer, and fast-food marketers have received criticism.

The issue is not really who is targeted but how and for what. Controversies arise when people feel that marketers are unfairly targeting vulnerable segments with questionable products or tactics.

Positioning for Competitive Advantage

Products position is the way the product is defined by consumers on important attributes. The place the product occupies in consumers minds relative to competing products.

Consumers will position products with out without the help of marketers. Marketers do not want to leave their products positions to chance. They want to plan positions that give their products the greatest advantage in selected target markets.

Positioning Map: Luxury SUVs

Choosing a Positioning Strategy

Identify a set of possible competitive advantages on which to build a position.
Competitive Advantages are advantages over competitors gained by offering greater value through lower prices or providing more benefits.

Choose the right competitive advantages.

How many differences to promote and which ones

Select an overall positioning strategy.

Choosing the Right Competitive Advantages

In deciding which differences to promote, we must look at how well it satisfies each of the following criteria: Important the difference delivers a highly valued benefit Distinctive competitors do not offer the difference or we can offer it in a more distinctive way Superior the difference is superior Communicable difference in communicable and visible Preemptive competitors cannot easily copy the difference Affordable buyers can afford to pay for the difference Profitable we can introduce the difference profitably

5 Winning Value Propositions

More PRICE The Same Less

More for More

Mercedes-Benz

More for the Same

Toyotas luxury models

More for Less

Dell

More
BENEFITS

The Same Less

The Same for Less Wal-Mart

Less for much Less Conway

Positioning Errors
Underpositioning:
Failing to really position the company at all.

Overpositioning:
Giving buyers too narrow a picture of the company.

Confused Positioning:
Leaving buyers with a confused image of a company.

Communicating and Delivering the Chosen Position

Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors strategies.

Video Case
Marriott
(10 minutes)

Thoughts
Why arent most businesses satisfied with going after just one niche in a market? Given the issues regarding segmentation, would surcharges such as energy or an early checkout fee be acceptable for any particular Marriott hotel lines?
http://marriott.com/