BU352 FINAL EXAM NOTES CHAPTER 8-17 - Marketing Chapter 8 Segmentation Targeting and Positioning Step 1 Establish Overall Strategy or Objectives y First

BU352 FINAL EXAM NOTES CHAPTER 8-17 - Marketing Chapter 8...

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Unformatted text preview: Marketing Chapter 8 ʹ Segmentation, Targeting, and Positioning Step 1: Establish Overall Strategy or Objectives y First step in the planning process is to articulate the vision/objectives of the company͛s marketing strategy y The segmentation strategy must be consistent with and derived from the firm͛s mission and objectives, as well as its current situation o Strengths o Weakness o Opportunities o Threats Step 2: Profile Segments y Describe the different segments (needs, wants and characteristics) which helps firms better understand the profile of the customers in each segment, as well as the customer similarities within a segment and dissimilarities across segments y Geographic Segmentation o The grouping of consumers on the basis of where they live o Country, region, province, city, rural, urban, climate o Continent: North America, Asia Pacific, Europe, Africa o Firms can provide the same basic goods and services to all segments even if they market globally or nationally y Demographic Segmentation o The grouping of consumers according to easily measured, objective characteristics such as age, gender, income, education, family life cycle, religion, ethnic background, etc o One demographic variable, sex, plays a very important role in how firms market products and services y Psychographic Segmentation o Used in segmentation o Delves into how consumers describe themselves o Allows people to describe themselves using those characteristics that help them choose how they occupy their time and what underlying psychographic reasons determine their choices o Components of psychographics:  Self value y Goals for life, not just the goals one wants to accomplish in a day y A component of psychographics that refers to overriding desires that drive how a person lives his/her life y The values help determine the benefits the target market may be looking for from a product  Self Concept y The image a person has of him/herself y Marketers can make use of this image through communications that show their product being used by groups of laughing people who are having a good time Connection emerges between group fun and the product being shown and connotes a certain lifestyle  Lifestyles y Refers to the way a person lives his/her life to achieve goals y Marketers have a built-in target group with similar interests and buying desires  VALS y A psychographic tool developed by SRI Consulting Business Intelligence o Classifies consumers into 8 segments:  Innovators  Thinkers  Believers  Achievers  Strivers  Experiencers  Makers  Survivors Behavioural Segmentation o Group of consumers based on the benefits they derive from products or services o Their usage rate, their user status and their loyalty o Dividing the market into segments whose needs and wants are best satisfied by the product benefits can be very powerful  Benefit Segmentation y The grouping of consumers on the basis of the benefits they derive from products or services  Loyalty Segmentation y Strategy of investing in loyalty initiatives to retain the firm͛s most profitable customers y Loyal customers are the most profitable in the long term Using multiple segmentation methods o Segmenting by demographics and geographic is easy because information about who the customers are and where they are located is readily available, but these characteristics don͛t help marketers determine their customer needs o Geodemographic Segmentation  The grouping of consumers on the basis of a combination of geographic, demographic and lifestyle characteristics  Particularly useful for retailers because customers typically patronize stores close to their neighbourhood y Retailers can use geodemographics to tailor each store͛s assortment to the preferences of the local community y y y Step 3: Evaluate Segment Attractiveness y Marketers must determine whether the segment is worth pursuing using several descriptive criteria o Identifiable  Firms must determine who is within their market to be able to design products or services to meet their needs Ensure that segments are distinct from one another because too much overlap between segments means that distinct marketing strategies aren͛t necessary to meet segment members͛ needs Reachable  The best product or service cannot have any impact if the market cannot be reached through persuasive communications and product distribution  The consumer must know the product/service exists, understand what it can do for him/hr and recognize how to buy it Responsive  The customers in the segmentation must react similarly and positively to the firm͛s offering Substantial and Profitable  Once the firm has identified its potential target markets, it needs to measure their size and growth potential  If a market is too small or its buying power insignificant, it won͛t generate sufficient profits or be able to support the marketing mix activities  Marketers must also focus their assessments on the potential profitability of each segment, both current and future y Segment profitability = segment size (# of people in segment) y Multiply by segment adoption percentage (% of customers in the segment who are likely to adopt the product) y Multiply by purchase behaviour (purchase price X # of times the customer would buy the product or service during a given time period y Multiply by profit margin percentage ([selling price ʹ variable costs] ÷ selling price) y Minus fixed costs  o o o Step 4: Select Target Market y The key factor likely to affect this decision is the marketer͛s ability to pursue such an opportunity or target segment y Segmentation Types: o Undifferentiated Segmentation Strategy or Mass Marketing  A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups  Can be effective for basic items like salt, sugar, greeting cards, etc  Common among small firms that offer products or services that consumers perceive to be indistinguishable, such as neighbourhood bakery o Differentiated Segmentation Strategy  A strategy through which a firm targets several market segments with a different offering for each  Firms embrace differentiated segmentation because it helps them obtain a bigger share of the market and increase the market for their products overall  Can be expensive o Concentrated Segmentation (Niche) Strategy  A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market͛s needs o Micromarketing (one-to-one marketing)  An extreme form of segmentation that tailors a product or service to suit an individual customer͛s wants or needs  Mass customization y The practice of interacting on a one-to-one basis with many people to create customer-made product or services y Providing one-to-one marketing to the masses Step 5: Identify and Develop Positioning Strategy y Positioning o The mental picture that people have about a company and its products or services relative to competitors o This mental picture is formed from multiple sources like friends, TV, etc o Consumers form their own ideas and feelings about a product or brand, and it is those very ideas and emotions that drive them toward or away from a brand or company y Marketing positioning involves a process of defining the marketing mix variables so that target customers have a clear, distinctive, desirable understanding of what the product does or represents in comparison with competing products y Positioning statement o Expresses how a company wants to be perceived by consumers y Positioning Strategy o Value  Value positioning may open up avenues to attract new customer segments that the company previously had neglected  Emphasize that consumers are offered the best product or service but must pay a premium price to cover the additional cost  Companies may use value positioning that lets customers know they are getting much less but they are also paying much less  Example : Wal-mart = ͞Always low prices͟ o Product Attributes  Focuses on those attributes of the product that are most important to the target market  Example: KFC = ͞Finger lick͛n good͟ o Benefits and Symbolism  Emphasises the benefits of the brand as well as the psychological meaning of the brand to customers  For established companies, a well-known symbol can also be used as a positioning tool, especially to appeal to loyal customers o Competition  Firms can choose to position their products or services head-to-head against a specific competitor or an entire product/service classification on similar attributes within the target market  Firms can also choose a differentiation strategy by going after a less competitive, smaller market niche o Market Leadership  Emphasize their leadership position within the industry Positioning Stages y Perceptual map o Displays, in two or more dimensions, the position of products or brands in the consumer mind y Ideal point o The position at which a particular market segment͛s ideal product would lie on a perceptual ma y Five important stages of Position: 1. Determine consumer͛s perceptions and evaluations of the product or service in relation to competitors  Marketers determine their brands position by asking consumers a series of questions about their and competitors products 2. Identify competitors position  When the firm understands how its customers view its brand relative to competitors, it must study how those same competitors position themselves 3. Determine consumer preferences  The firm knows what the consumer thinks of the products or services in the marketplace and their positions relative to one another  Now it must find out the ͞ideal͟ product or service 4. Select the position 5. Monitor the positioning strategy  Consumer͛s tastes shift and competitors react to those shifts Repositioning y Good marketers constantly re-evaluate their brand͛s position in order to determine when to reposition it y Companies should re position their brands to keep up with changes in the marketplace or to put a fresh spin to their stale and stodgy brand y Brand repositioning o A strategy in which marketers change a brand͛s focus to target new markets or realign the brand͛s core emphasis with changing market preferences y Firms often need to spend tremendous amounts of money to make tangible changes to the product and packages, as well as intangible changes to the band image͛s image through advertising Marketing Chapter 9: Product, Branding and Packaging Decisions Product Assortment and Product Line Decisions y Product assortment (product mix) o The complete set of all products offered by a firm y Product line o Groups of associated items, such as those that consumers use together or think of as part of a group of similar products y Product category An assortment of items that the customer sees as reasonable substitutes for one another Each category within a product line may use the same or different brands o The name, term, design, symbol, or any other features that identify one seller͛s good or service as distinct from those of other sellers Product assortment can be described in terms of: o Product line breadth  The number of product lines, or variety, offered by the firm o Product line depth  The number of categories within a product line Within each product category are a number of individual items called stock keeping units which are the smallest unit available for inventory control The category depth o The number of stock keeping units (SKUs) within a category The decision to expand or contract product lines and categories depend on several industry, consumers and firm-level factors When firms add new product categories and brands to their product assortments, they often earn significant sales and profits Too much variety in product assortment is often too costly to maintain and too many brands may weaken the firm͛s brand reputation o y y y y y y y Change Product Mix Breadth Increase Breadth y Firms often add new product lines to capture new or evolving markets, increase sales, and compete in new venues Decrease Breadth y Sometimes it is necessary to delete entire product lines to address changing marketing conditions or meet internal strategic priorities Change Product Mix Depth Increase Depth y Firms may add new products within a line to address changing consumer preferences or preempt competitors while boosting sales y A firm may also add new products to its product line in order to serve new target segments Decrease Depth y It may be necessary to delete product categories to realign resources y The decision to delete products is never taken lightly y Substantial investments have been made to develop the brand and manufacture the products Change # of SKUs y Addition or deletion of SKUs in existing categories to stimulate sales or react to customer demand y Fashion manufacturers and their retailers, change their SKUs every season Product Line Decisions for Services y Many of the strategies used to make product line decisions for physical products can also be applied to services y On the retail side, banks offer savings and chequing accounts to individual consumer o The different types of accounts thus are equivalent to SKUs Branding y Provides a way for a firm to differentiate its product offerings from those of its competitors y Can be used to represent the name of a firm and its entire product assortment, one product line, or a single item Value of Branding for the Customer and the Marketer y Brands add value to merchandise and services beyond physical and function characteristics or the pure act of performing the service Brands Facilitate Purchasing y Often easily recognized by consumers and because they signify a certain quality level and contain familiar attributes, brands help consumers make quick decisions y Brands enable customers to differentiate one firm or product from another Brands Establish Loyalty y Many customers become loyal to certain brands in much the same way as you become loyal to certain friends y They wouldn͛t consider switching brands and in some cases feel a strong affinity to certain brands Brands Protect from Competition and Price Competition y Strong brands are somewhat protected from competition and price competition y Because some brands are more established in the market and have a more loyal customer base, neither competitive pressures on price nor retail-level competition is as threatening to the firm Brands Reduce Marketing Costs y Firms with well-known brands can spend relatively less on marketing costs than firms with little known brands because the brand sells itself Brands are Assets y Brands are also assets that can be legally protected through trademarks and copyrights and thus constitute a unique ownership for the firm y Firms sometimes have to fight to keep their brands Brands Impact Market Value y Having well-known brands can have a direct impact on the company͛s bottom line y Value of a brand can be calculated by assessing the earning potential of the brand over the next 12 months Brand Equity y y y y The set of assets and liabilities linked to a brand that add or subtract from the value provided by the product or service Firms can build, manage and harness brands over time to increase its revenue, profitability and overall value Firms spend millions of dollars on promotion, advertising and other marketing efforts throughout a brand͛s life cycle Experts look at four aspects of a brand to determine its equity Brand Awareness y Measures how many consumers in a market are familiar with the brand and what it stands for y Created through repeated exposures of the various brand elements (brand name, logo, symbol, character, packaging or slogan) in the firms communication to consumers y The more aware or familiar customers are with a brand, the easier their decision making process will be y Brand awareness is important for infrequently purchased items or items the consumer has never purchased before y If the consumer recognizes the brand, it probably has attributes that make it valuable y Certain brands gain predominance in a particular product market overtime that they become synonymous with the product itself (e.g. Q-tips) y Companies must be vigilant in protecting their brand names, because if they are used so generically over time, the brand itself can lose its trademark status y Marketers can create brand awareness through repeated exposures of the various brand elements o Such as advertising, personally selling, sponsorship, event marketing, publicity, etc y Because brand awareness is one of the most important steps in creating a strong brand, firms are willing to spend a lot of money advertising the brand Perceived Value y The relationship between a product or service͛s benefits and its cost y Customers usually determine the offering͛s value in relationship to that of its close competitors y If they feel an inexpensive brand is about the same quality as a premium brand, the perceived value of the cheaper choice is high y Good marketing raises customers quality perceptions relative to price o Increases perceived value y Many customers tend to associate higher prices with higher quality Brand Associations y The mental links that consumer make between a brand and its key product attributes y Can involve a logo, slogan, or famous personality y These brand associations often result from a firm͛s advertising and promotion efforts y Firms sometimes often develop a personality for their brands, as if the brand were human y Brand personality o Refers to a set of human characteristics associated with a brand, which has symbolic or self-expressive meanings for consumers o Elements include male, female, young, old, fun-loving, conservative, as well as qualities such as fresh, smooth, round, clean or floral Brand Loyalty y Occurs when a consumer buys the same brand͛s product or service repeatedly over time rather than buying from multiple suppliers within the same category y Brand-loyal customers are an important source of value for firms y Such consumers are often less sensitive to price y Firms sometimes reward loyal customers with loyalty or customer relationship management (CRM) programs such as points customers can redeem for discounts or free services, etc y The marketing costs of reaching loyal customers are much lower because the firm doesn͛t have to spend money on advertising and promotion campaigns to attract these customers y Firms can manage brand loyalty through a variety of CRM programs o Provide a community feeling among loyal customers Branding Strategies y Firms institutes a variety of brand-related strategies to create and manage key brand assets Brand Ownership y Brands can be owned by any firm in the supply chain whether manufacturers, wholesalers or retailers y Three basic brand ownership strategies: o Manufacturer brands (national brands)  Brands owned and managed by the manufacturer  Majority of the brands in Canada are manufacturer brands o Private-label brands (store brands)  Brands developed and marketed by a retailer and available only from that retailer  Some manufacturers prefer to make only private-label merchandise because the costs of national branding and marketing are prohibitive, whereas other firms manufacture both their own brand and merchandise for other brands or retailers  Common in supermarkets, discount stores, and drug stores  Popularity among consumers depends on several factors: y Consumer preferences for a lower-cost brand, trust the customer has in the brand, etc  Fast gaining in popularity and consumer loyalty (Wal-Mart & Costco)  Have also gained popularity in apparel and other categories found in department and speciality stores o Generic  A product sold without a brand name, typically in commodities markets  Popularity and acceptance of general products have declined  Consumers q...
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  • Fall '11
  • DavidRose
  • Marketing

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