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

1. Chapter 6Segmentation, Targeting, & Positioning: Building the Right Relationships with the Right Customers Professor Marshall Queens College

2. P&G’s Story What brands are produced by Proctor & Gamble? • 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

3. 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

4. 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

5. 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!

6. 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

7. 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

8. 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.

9. 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.

10. 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.

11. 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 Tiffany’s targets the affluent

12. Market Segmentation • Psychographic • Social class • Lifestyle • Personality

13. 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 Mother’s Day and Father’s Day were promoted to increase the sale of candy, cards, flowers, and gifts.

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

15. 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

17. 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.

18. 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

19. 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

20. 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.

21. 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.

22. 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.

23. Selecting Target Segments Micromarketing Local or individual marketing Undifferentiated Mass Marketing Differentiated Segmented Marketing Concentrated Niche Marketing Targeting Broadly Targeting Narrowly 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.

24. 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 groups—cities, 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. It’s the ultimate extreme in target marketing.

25. 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 • Product’s 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.

26. 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.

27. Positioning for Competitive Advantage • Product’s 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.

28. Positioning Map: Luxury SUVs

29. 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.

30. Choosing the Right Competitive Advantages • 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 In deciding which differences to promote, we must look at how well it satisfies each of the following criteria:

31. 5 Winning Value Propositions PRICE More The Same Less More for More More for the Same More for Less Mercedes-Benz Toyota’s luxury models Dell The Same for Less BENEFITS Wal-Mart More The Same Less Less for much Less Conway

32. 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.

33. 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.

34. Video Case Marriott (10 minutes)

35. Thoughts • Why aren’t 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/