Marketing: Chapter 7 (Test 2)

Dunkin’ Donuts vs Starbucks
took a group of loyal Dunkin’ Donuts customers and paid them $100/week to drink coffee at Starbucks and vice versa. Regardless of taste preferences, brand loyalty over incentives of $100. Identifications with their segments is very strong
-Dunkin’ fans views starbucks buyers as pretentious and trendy. “If I want to sit on a couch, I stay at home”
-Starbucks fans view Dunkin as plain and unoriginal
Market targeting
evaluating each market segment’s attractiveness and selecting one or more segments to enter
-instead of scattering their marketing efforts (the shotgun approach), firms are focusing on the buyers who have greater interest in the values they create best (the rifle approach)
Market segmentation
diving a market into smaller segments of buyers with distinct needs, characteristics or behaviors that might require separate marketing strategies or mixes
1. geographic segmentation
2. demographic segmentation
3. psychographic segmentation
4. behavioral segmentation
differentiating the market offering to create superior customer value
arranging for a market offering to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers
Geographic segmentation
-dividing the market into different geographical units, such as nations, regions, states, countries, cities or even neighborhoods
-a company may decide to operate in one or a few geographical areas or operate in all areas but pay attention to geographical differences in needs and wants ex- Dominos
Demographic segmentation
-divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity and generation
-MOST IMPORTANT/POPULAR bases for segmenting customer groups–> consumer needs, wants, and usage rates often vary closely with demographic variables; easier to measure
-Easiest to define
Age and life-cycle segmentation
dividing a market into different age and life-cycle groups
ex- Jello; for children- fun snack, teaches the world to wiggle. for adults-its a tasty, guilt free indulgence
Gender segmentation
dividing a market into different segments based on gender. Used in clothing, cosmetics, toiletries, magazines
ex- P&G Secret (woman’s deodorant)
Income segmentation
dividing a market into different income segments
ex- many companies target affluent consumers with luxury goods and convenience services. Family Dollar–low and middle income groups
Psychographic segmentation
dividing a market into different segments based on social class, lifestyle, or personality characteristics.
lifestyle ex- Anthropology- Bohemian-chic lifestyle
personality ex- Mountain Dew- rebellious, adventurous, go your own way personality vs. Coca-cola- mature, practical, cerebral but good-humored personality types
Behavioral segmentation
-dividing a market into segments based on consumer knowledge, attitudes, uses or responses to a product.
-can be divided by occasion, benefit, user status, usage rate, loyalty status
Occassion segementation
dividing the market into segments according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item
ex- Campbell’s advertises its soups more heavily in the cold winter months
ex-Home Depot runs special springtime promotions for lawns and garden products
Benefit segmentation
dividing the market into segments according to the different benefits that consumers seek from the product
ex- Gillette research revealed 4 distinct benefit segments of women shavers-perfect shave seekers (seeking a close shave with no missed hairs), EX seekers (fast and convenient shaves), skin pamperers (easy on the skin), and the pragmatic functionalists (basic shaves at an affordable price)–>Gillette designed venus razors for each segment
User status
-markets can be segmented into nonusers, ex-users, potential users, first time users and regular users of a product.
-marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate relationships with ex-users
-potential user groups= new parents (Pampers swaddlers are the diaper provided for newborns at most US hospitals)
Usage rate
-markets can be segmented into light, median and heavy product users
-heavy users are often a small percentage of the market but account for a high percentage of total consumption
Loyalty status
-a market can be segmented by consumer loyalty
-consumers can be loyal to brands (Tide), stores (Target) and companies (Apple)
-buyers can be divided into groups according to their degree of loyalty ex- “Mac Fanatics” loyal customers–promote the brand via blogs, fan websites, youtube videos, word of mouth. Their passion is contagious
-leading segmentation system that uses multiple segmentation bases
-classifies every American household based on a host of demographic factors- such as age, educational level, income, occupation, family consumption, ethnicity, and housing.
-and behavioral and lifestyle factors-purchases, free time activities and media preferences
-classifies US households into 66 demographically and behaviorally distinct segments organized into 14 social groups
-carries exotic names “Gray Power” “Big City Blues” “Brite Lites, Li’l City”
-help marketers segment people and locations into marketable groups of like-minded customers–>each segment has its own pattern of likes, dislikes, lifestyles and purchase behaviors
****can help companies identify and better understand key customer segments, reach them more efficiently and tailor market offerings and messages to their specific needs
Segmenting business markets
-use additional segment variables: operating characteristics, purchasing approaches, situational factors and personal factors
Segmenting international markets
companies segment international markets by using one of a combo of several variables:
1. geographic location-grouping countries by region such as Western Europe, Middle East, Africa.
-assumes that nations close to one another will have many common traits and behaviors
2. economic factors- countries might be grouped by population income levels or their overall economic development
3. political and legal factors- type and stability of government, reciprocity of foreign firms, monetary regulations, amount of bureaucracy
4. cultural factors-grouping markets according to common languages, religions, values and attitudes, customs and behavioral patterns
Intermarket (cross-market) segmentation
forming segments of consumers who have similar needs and buying behaviors even though they are located in different countires
ex- H&MM targets fashion-conscious but frugal shoppers in 43 counties with its low-priced, trendy apparel
ex-Coca-Cola creates special programs to target teens, core consumers of its soft drinks
Requirements of effective segmentation
1. measurable- the size, the purchasing power, and profiles of the segments can be measured
2. accessible- the market segments can be effectively reached and served
3. substantial- the market segments are large or profitable enough to serve. a segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.
4. differentiable- the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments
5. actionable-effective programs can be designed for attracting and serving the segments
3 Mains ways companies evaluate market segments
-in evaluating different market segments, a firm must look at 3 factors:
1. segment size and growth
2. segment structural attractiveness
3. company objectives and resources
Segment size and growth
**the right size and growth
-the largest, fastest growing segments are not always the most attractive ones for every company (small companies–may lack the skills and resources need)
Segment structural attractiveness
evaluating number of competitors, entry/exit barriers, existence of many or potential substitute products, relative power of buyers, power of suppliers (too powerful–can control prices or reduce the quality or quantity of ordered goods and services)
Company objectives and resources
must mesh with the company’s long-run objectives
Target market
-a set of buyers sharing common needs or characteristics that the company decides to serve
-market targeting can be carried out at different levels
1. undifferentiated (mass) marketing
2. differentiated (segmented) marketing
3. concentrated (niche) marketing
4. micro-marketing (local or individual marketing)
Undifferentiated (mass) marketing
-a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer
-focuses on what is COMMON in the needs of the consumers rather than what is different
-the company designs a product and marketing program that will appeal to the largest number of buyers
***strong costs with this strategy–> difficult developing a product or brand that will satisfy all customers, trouble competing with more-focused firms that do a better job of satisfying the needs of specific segments
Differentiated (segmented) marketing
-a firm decides to target several market segments and design separate offers for each
-ex- P&G markets 6 different laundry detergent brands in the US (Bold, Cheer, Dash, Dreft, Gain Tide)
-developing a stronger position within several segments creates more total sales than undifferentiated markets across all segments
***costs–> increases the costs of doing business, more expensive to develop and product 10 units of 10 different products than 100 units of a single product- requires extra marketing research, sales analysis, promotion planning etc
Concentrated (niche) marketing
-a firm goes after a large share of one or a few segments or niches
-ex: Whole Foods only 300 stores and $10 billion in sales
-firms achieve a strong market position because of its greater knowledge of consumer needs in the niches it serves
-market more EFFECTIVELY by fine-tuning its products, prices and programs to the needs of carefully defined segments
-market more EFFICIENTLY, targeting its products or services, channels and communications programs toward only consumers that it can serve best and most profitably
-niching lets smaller companies focus their limited resources on serving niches that may be unimportant to or overlooked by larger competitors
-many companies stars as nichers to get a foothold against larger, more resourceful competitors and then grow into broader competitors
Micro-marketing (local or individual marketing)
-tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments; includes
1.local marketing
2. individudal marketing
Local marketing
-tailoring brands and marketing programs to the needs and wants of local customer segments- cities, neighborhoods, specific stores
-ex- Walgreens-owned NYC drugstore chain Duane and Reade adapts its merchandise assortments to individual neighborhoods. Penn Station–> sandwiches, WallStreet-> sushi
-location based marketing is going mobile, reaching on the go consumers as they come and go in key local market areas
-ex- Groupon-deal of the day services
-***drawbacks- drive up manufacturing and marketing costs by reducing the economies of scale
Individual marketing
-tailoring products and marketing programs to the needs and preferences of individual customers
-aka one-to-one marketing, mass customization, markets-of-one marketing
Mass customization
-firms interact one-to-one with masses of customers to design products and services tailor made to individual needs
-companies are hypercustomizing everything from food to artwork to earphones to sneakers to motorcycles ex- Nike ID
Choosing a targeting strategy
5 factors
1. companies resources
2. degree of product variability
3. products life-cycle stage
4. market variability
5. competitors marketing strategies
Companies resources
when resources are limited–> concentrated marketing makes most sense
Product variability
-uniform products (grapefruit, steel)–> undifferentiated marketing
-products that vary in design (cameras, cars)–> differentiated, concentrated
Products life-cycle statge
when a firm introduces a new product it may be practical to launch one version only–> differentiated or concentrated marketing
Market variability
if most buyers have the same taste, buy the same amounts and react the same way to marketing efforts–>undifferentiated marketing
Competitors’ marketing strategies
-when competitors use differentiated or concentrated marketing–>undifferentiated marketing can be suicidal
-but when competitors use undifferentiated marketing, a firm can gain advantage by using differentiated or concentrated marketing, focusing on the needs of buyers in specific segments
Socially responsible target marketing
-the issue is not really who is targeted but rather HOW and for WHAT. Controversies aries when marketers attempt to profit at the expense of targeted segments- when they unfairly target vulnerable segments or target them with questionable products or tactics.
-Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted
ex- Mcdonalds Happy Meals and little trinkets–> too powerful of a connection between children and the fat and calorie laden meals
ex-VS adult products spilling over to children’s segment
Children’s Advertising Review Unit
the advertising industry’s self-regulatory agency, published extensive children’s advertising guidelines that recognize the special needs of children audiences
Value proposition
company must decide not only which segments of the market it will target but–how it will create differentiated value for targeted segments
Product position
company must decide what position is whats to occupy in those segments. Product position is the way a product is defined by consumers on important attributes-the place the product occupies in consumers’ minds to competing products
-a product’s position is the complex set of perceptions, impressions and feelings that consumer have for the product compared with competing products
-Marketers must plan positions that will give their products the greatest advantage in selected target markets and they must design marketing mixes to create these planned positions
Positioning maps
-show consumer perceptions of their brands versus competing products on important buying dimensions
-ex SUV market (looks at price vs orientation- luxury-performance
Differentiation and positioning task
3 steps
1. identifying a set of differentiating competitive advantages on which to build a position
2. choosing the right competitive advantages and selecting and overall positioning strategy
3. effectively communicate and deliver the chosen position to the market
Competitive advantge
an advantage over competitors gained by offering a greater customer value, either by having lower prices of providing more benefits that justify higher prices
Finding points of differentiation
1. product differentiation
2. services differentiation
3. channel differentiation
4. people differentiation
5. image differentiation
Product differentiation
brands can be differentiated on features, performances, or style and design.
ex- Subway differentiates itself as a healthy fast-food choice
Service differentiation
Companies gain services differentiation through speedy, convenient or careful delivery
Channel differentiation
gain competitive advantage through the way they design their channel’s coverage, expertise and performance
ex-Amazon and GEICO set themselves apart with their smooth-functioning direct channels
People differentiation
hiring and training better people than their competitors do
ex- Disney employees must be competent, courteous, friendly, upbeat
Image differentiation
-a company or brand image should convey a product’s distinctive benefits and position
-Apples bite mark, mcdonalds golden arches, colorful google logo–>strong company or band recognition and image differentiation
-can be associated with celebrities, colors, symbols, characters
Choosing the right competitive advantges
must decide
1. how many differences to promote
2. which difference to promote
How many differences to promote?
-many marketers think that companies should aggressively promote only one benefit to the target market
–> each brand should develop a “Unique selling proposition” (USP) and stick to it
-other marketers think that companies should position themselves on more than one differentiator
ex: Gatorade originally offered a sports drink positioned only on performance hydration. Now offer an entire G series of sports drinks– before, during, after
Which differences to promote?
-a difference is worth establishing to the extent that it satisfies the following criteria:
1. important- the difference delivers a highly valued benefit to target buyers
2. distinctive- competitors don’t offer this difference, or the company can offer it in a more distinctive way
3. superior- the difference is superior to other ways customers might obtain the same benefit
4. communicable- the difference is communicable and visible to buyers
5. preemptive- competitors cannot easily copy the difference
6. affordable- buyer can afford to pay for the difference
7. profitable- the company can introduce the difference profitably
Selecting an overall positioning strategy
the full positioning of a brand is called the brand’s value proposition–> the full mix of benefits on which a brand is differentiated and positioned; it is the answer to the customer’s question “why should i buy your brand?”
Possible value propositions
1. more for more
2. more for the same
3. the same for less
4. less for much less
5. more for less
More for more
-providing the most upscale product or service and charging a higher price to cover the higher costs
-offers higher quality and gives prestige to the buyer ex Rolex watches
More for the same
-companies can attack a competitor’s more for more positioning by introducing a brand offering comparable quality at a lower price
-ex Toyota introduced its Lexus line with a more for the same value proposition versus Mercedes and BMW
The same for less
-discount stores such as Walmart, Best Buy, DSW Shoes use this positioning.
-offer many of the same products as department stores ad specialty sores buy at deep discounts based on superior purchasing power and lower-cost operations
Less for much less
-few people need, want or can afford “the very best” in everything they buy
-consumers will gladly settle for less than optimal performance
ex Holiday Inn- no mints on pillows, attached restaurants, pools (suspend amenities and therefore charge less)
More for less
*winning value proposition
-can be achieved in the short run ex- when Home Depot first opened- arguably the best product selection, the best service and the lowest prices compared to local hardware stores/ home improvement stores
-long run hard to sustain best of both positioning
Positioning statement
a statement that summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference)
ex: Evernote- “to buy multitaskers who need help remebering thing, Evernote is digital content management application that makes it easy to capture and remember moments and ideas from your everyday life using your computer, phone, tablet and the Web”
Communicating and delivering the chosen position
-must take action
-if company decides to build a position on better quality and service, it must first deliver that position
-all the company’s marketing mix efforts (product, price, place, promotion) must support the positioning strategy
-companies find it easier to come up with a good positioning strategy than to implement it