Marketing Midterm

Why Segment Markets

- A business firm segments its markets so it can respond more effectively to the wants of groups of potential buyers and thus increase its sales and profits
- Nonprofit: also segment clients they serve to satisfy client needs more effectively while achiev

- Market segmentation

involves aggregating prospective buyers into groups that 1. Have common needs and 2. Will respond similarly to a marketing action
Aggregate consumers into groups (segments) that have similar needs and will react similarly to a marketing action.
Changes: t

- Marketing segments

are the relatively homogenous groups of prospective buyers that result from the market segmentation process, each market segment consists of people who are relatively similar to each other in terms of their consumption behavior

- Product differentiation

: a firm using different marketing mix activities like product features and advertising to help consumers perceive the product as being different and better than competing products? may involve physical features, size, color or nonphysical ones like image


Linking needs to actions
- The process of segmenting in a market and selective specific segments as targets is the link between the various buyers needs and the organizations marketing program
- Marketing segmentation leads to tangible marketing actions t

- Market-product grid

a framework to relate to market segments of potential buyers to products offered or potential marketing actions

When and how to segment markets

One size fits al mass markets no longer exist!
Recession and size of middle-income market has shrunk? offer different products to reach 1. High-income and 2. Low-income families (P&G strategy)
- A business goes to the trouble and expenses of segmenting it

One product and multiple market segments

when an organization produces only a single product or service and attempts to sell it to two ore more market segments it avoids the extra costs of developing and producing additional versions of the product

Multiple Products and Multiple Market Segments

multiple products aimed at multiple market segments, more expensive than producing only a single product but its very effective if it meets customers' needs better, doesn't reduce quality or increase price, and adds to sales revenues and profits�

Segments of One: Mass Customization

each customer has unique needs and wants and desires special TLC means tailoring goods or services to the tastes of individual customers on a high-volume scale. Mass customization is the next step beyond build-to-order (BTO) manufacturing a product only w

- Organizational synergy

- the increased customer value achieved through performing organizational functions such as marketing or manufacturing more efficiently
- Increased customer value can be through: more products, improved quality on existing products, lower prices, easier a

- Cannibalization

when the increased customer value involves adding new products or a new chain of stores, the product differentiation-market segmentation trade-off raises a critical issue: are the new products or new chain simply stealing customers and sales from the olde

Steps in Segmenting and targeting Markets

- 1. Group potential buyers into segments, 2. Group products to be sold into categories, 3. Develop a market-product Grid and estimate the size of markets, 4. Select Target markets, 5. Take marketing actions to reach target market: these steps link the ma

Grouping potential buyers into segments (Step 1)

- Is it possible to segment and is it worth doing- important questions
- Criteria to use in forming the segments (5 essential criteria)
* Simplicity and cost-effectiveness of assigning potential buyers to segments
* Potential for increased profit: if oppo

Ways to segment Consumer Markets

geographic segmentation (based on where prospective customers live or work: region, city, size), demographic segmentation (based on some objective physical (gender, race) measureable (age, income) or other classification attribute (birth era, occupation,

Usage rate

the quantity consumed or patronage (store visits) during a specific period
- Usage rate is sometimes referred to in terms of the 80/20 rule: a concept that suggests 80% of a firms sales are obtained from 20% of its customers, suggest that a small fraction

80/20 rule

a concept that suggests 80% of a firms sales are obtained from 20% of its customers, suggest that a small fraction of customers provides a large fraction of the firm's sales

Group products to be sold into categories (Step 2)

Group products to be sold into categories (Step 2)

Develop a Market-Product Grid and Estimate the Size of Markets (Step 3)

- In a complete market-product grid analysis, each cell in the grid can show the estimated market size of a given product sold to a specific market segment
- Developing a market-product grid means identifying and labeling the markets (horizontal rows) and

Select Target Markets (Step 4)

- If choose too narrow a set of segments, a firm may fail to reach the volume of sales and profits it needs
- If it selects too broad a set of segments, it may spread its marketing efforts so thin that the extra expense exceeds the increased sales and pro

Criteria to Use in Selecting the Target Segments

Two steps: 1. Divide the market into segments 2. Actually pick the target segments
5 criteria
- Market size: whether its worth going after or if there is a market for the product
- Expected growth: future growth: growing market--> more competition so mayb

Step 5: Take Marketing Actions to Reach Target Markets

- The purpose of developing a market-product grid is to trigger marketing actions to increase sales and profits
- Keep in mind what your headquarters are doing, what competitors are doing, and what might be changing in the area you are serving/targeting

Market-Product Synergies

Marketing synergies: run horizontally across the grid, each row represents an opportunity for efficiency in terms of a market segment
Product synergies: running vertically down the market-product grid, each column represents an oppo

- Product positioning

the place a product occupies in consumers' minds on important attributes relative to competitive products
- based on substantive brand value: memorable and distinctive (differentiate it from competition)
Differentiation is the foundatin of positioning

- Product repositioning

changing the place a product occupies in a consumers' mind relative to competitive products
- Head-to-head positioning: involves competing directly with competitors on similar product attributes in the same target market
- Differentiation positioning: inv

Product positioning Using Perceptual Maps

Steps to discover perceptions in the minds of potential customers
1. Identify the important attributes for a product or brand class
2. Discover how target customers rate competing products or brands with respect to these attributes
3. Discover where the c

- Perceptual map

a means of displaying or graphic in two dimensions the location of products or brands in the minds of consumers�enables a manager to see how consumers perceive competing products or brands as well as the firms own product or brand


- Market segmentation involves aggregating prospective buyers into groups that have common needs and will respond similarly to a marketing action. Organizations segment their markets when it increase their sales, profits, and ability to serve customers be

Market segmentation links market needs to an organizatoins marketing program

1. identify market needs: benefits in terms of: product features, expense, quality, savings in time and convenience
2. link needs to actions: process of segmenting and targeting markets
3. execute marketing program: A marketing mix in terms of the 4 ps

STP: foundation of modern marketing

Segment market:
Divide larger market into groups with similar needs and who will react similarly to a marketing action.
Target marketing:
Evaluate segments and select one or more segments to enter.
Create a clear and distinctive place in cons

STP process

Specifically target market segments:
1 product with multiple target segments
Multiple products/multiple segments
Mass customization
Tums: stomach indigestion AND calcium replacement
Dell: mass customization, computer built for you ^^ (one product with mul

Criteria for Effective Segmentation

Similarity of needs of potential buyers within a segment.
Difference of needs of potential buyers among segments. (if difference is great enough, separate into different segments of potential buyers among segments)
Simplicity and cost of assigning potenti

variables for market segmentation

income: china/mexico has to use this because multigenerational households- cannot use age segmentation
usage patterns
psychographics/life styles:opinions, interests, and activities: lifestyle segmentation provides isight in

Demographic Segmentation

Family Size
Marital Status
multivariable: more than one variable used for segmentation

Geographic Segmentation

Population Density: olive garden: smooth marinara in the north, Chunky marinara in the south

Usage and Commitment

Heavy/medium/light users
Brand-loyal users
Switchers/Variety seekers: hard to keep, like to switch around, influenced by price, coupons, get bored
Emergent Consumers: due to life cycle events, constant influx of first-time buyers (cri

Target Market

A single firm can't satisfy all consumers' needs so marketers select a...
Target market - a specific group of potential consumers

Goals of Positioning

Define the product for consumers.
Help consumers remember the product.
Must communicate product attributes that are relevant to consumers and that DIFFERENTIATE it from competition.
Positioning must be believable and sustainable!

Popular Bases for Positioning

Attribute: A product is associated with an attribute, product feature, or customer benefit.
Price and Quality: This positioning base stresses high price as a signal of quality or emphasizes low price as an indication of value.
Competition: A product is po

packaging, brand name, and advertising

help consumers know what segment it belongs to

Benefit segmentation

most powerful, what consumers value/need

Why Are New Products Important?

Product life cycles are becoming shorter Technology and consumer priorities are changing
Company can gain a foothold in a new market.
New products can help keep overall corporate sales up when other products or categories fail.

Classification of Consumer Goods

Convenience Goods � Shopping Goods � Specialty Goods � Unsought Goods
These classifications differ in terms of : 1. Effort spent on the purchase decision 2. Frequency of purchase 3. Brand loyalty and acceptance of substitutes

Consumption Effects

Consumption Effects Define Newness
Marketing emphasis
Requires no new learning by consumers
Sensor and New Improved Tide

New Product Process

New Product Strategy Development:
Defines the role of new products in terms of the firm's overall objectives. This stage utilizes SWOT and environmental scanning to determine opportunities to exploit in the marketplace.
Idea Generation: 3,000 raw ideas-->

Screening and Evaluation

Screening and Evaluation
Concept Testing:
In general, concept testing asks consumers these types of questions:
1. Is the idea easy to understand?
2. Do you perceive distinct benefits for this product over those products currently on the market?
3. Do you


Business Analysis:
Last opportunity to kill project before significant capital is invested. Analysis includes marketing strategy review, economic payouts, legal review.
Development: does the product perform, does this product meet its concepts/ does it pe

Benefits of Test Marketing

Yields a more reliable forecast of future sales than no testing.
� Can pre-test alternative marketing plans.
� May discover a product fault missed in the product
development stage.
� Discover clues to distribution problems.
� Gain better insights into the

Concerns With Test Markets

*Problem of obtaining a set of markets that is reasonably representative of the country as a whole.
� Problem of translating national media plans into local equivalents.
* Problem of translating national media plans into local equivalents
� Problem of est

Test Market Alternatives

Alternatives to the traditional 12-18 month market test (1-3 million dollars):
Research firms shows a consumer sample advertising for a variety of products, including the new product being tested. The sample group is gi

Test Market Results

Trial: first purchase of a product
High trial, high repurchase rate-GO
High trial, low repurchase rate-Drop or redesign product
Low trial, high repurchase rate- Increase advertising and sales promotion (means once a few tried it, loved and repurchased it)


The stage of the New Product Process that positions and launches a new product in full- scale production and sales. Most expensive because have to build up inventory levels
National or regional rollout
Slotting Fees: shelf space and time limit (3-

Convenience goods

little time/effort put in purchase decision process
bread, milk

shopping goods

wil accept substitutes, other brands considered

specialty goods

will nnot accept substitute products or brans, higher consequences, usually more expensive. viewed as specialty= produce wider variety of goods so less likely to switch, more options with same brand/look/prestige

unsought goods

a consumer on their own does not go out and seek, requires a lot of information and selling
- life insurance, funeral plot

discontinuous innovations

creates new consumption patterns among consumers, requires huge amount of new learning

new product strategy

role for product, takes about 3,000 roughs to get 1 good commercial idea

Matel and Barbie

- relevancy through product life cycle (skillful execution)
(job and ethnic diversity, personalized barbie, couture barbies, international, sell 2 every second world-wide)

Product Life cycle

Products can come back from/ out of decline stage by repositioning or a new strategy (bayer aspirin) if none viable, drop the product
describes the stages a product goes through in the market place: introduction, growth, maturity, and decline
- Total indu


- intermediary between retailer and seller/company

Selective demand

- brand centered, demand for actual brand (based on attributes)

Market Modification

Sales volume: number of brand users X usage rate per user
Expand number of brand users (fedex)
- convert non-users of category
-enter new market segments (not changing the product)
- win competitors customers
- repositioning:- Usually an attempt to bolste

Usage strategies

- more frequent use
- more usage per occasion
- new and more varied uses

Product modification

- actually change the product/ parts of it/ attributes
- change product characteristics to increase sales volume
: involves altering one or more of a products characteristic such as quality, performance, or appearance to increase the products value to cus

Brand personality

- has to remain consistent across 4 p decisions, developed through multiple campaigns over time
if marketers do not establish brand personality via ADV, promo, marketing decisions/strategies, the consumer will-- dangerous!
*cant have brand equity without


- logo change 6/7/12
want consistency

Benefits of high brand equity

- more leverage with the trade (retailers)
- company can more easily launch brand and line extensions: trust and brand power
Company has more leverage with the trade.
� Company can charge a higher price than competitors.
� Company can more easily launch b

Line extension

- helps build shelf space
- same brand name in new market, expanding into new market segments within same product class

Bad brand extensions (brands have limitations!)

Bic-- pantyhose
Levi's-- tailored suits
Clorox-- laundry detergent

Brand extension

current brand name into new/different product class

example of brand extension

Ford (brand): focus, explorer, fusion, escape (sub-brands)

Branding strategy

Multiproduct: includes brand/product extensions- family name: promotes other products of same brand
Negative: diluting- what is your expertise
Promotion of one item promotes the firm's other products.
Facilitates acceptance of new products by


ad agency and company work on this together
- 15% of typical product cost spent on packaging
- Functionality: tamper proof? sealed? Protection
- Communication tool: what is inside, ouces, pack size
- Perceptual: color connotations
Factors conside


- the more intermediaries between manufacturer and consumer, the less control the manufacturer has
- everyone in channel gets profit so more intermediaries means less money/profit for manufacturer
- channels and manufacturer= long term relationships


- gather materials, store them, and distribute them
- buy and sell
- can eliminate middle man but NOT their function
- generally in a direct channel, manufacturer does job of middle man/intermediary: promotion, customer service, repair shop

Dual Distribution

example (outlet malls)
- reach different buyers by using 2 or more different types of channels for the same basic product: growing in popularity
main store: in style, current, expensive, high quality
vs. (conflict because selling to different markets)

Vertical marketing systems

Producer, wholesalers, retailers, act as a unified system, eliminates conflict/ miscommunication, time delays
corporate: related to each other by ownership (control!)
Contractual: related via contracts
Administered: related to each other by channel leader

- Product

: a good, service, or idea consisting of a bundle of tangible and intangible attributes that satisfies consumers' needs and is received in exchange for money or something else of value
- Good: has tangible attributes that a consumers five sense can percei

- Consumer products

products purchased by the ultimate consumer
- Differ in terms of the effort the consumer spends on the decision, the attributes used in making the purchase decision, and the frequency of purchase
- Convenience products: items that the consumer purchases f

- Business products (B2B)/ industrial products

are products organizations buy that assist in providing other products for resale

- Product item

a specific product that has a unique brand, size, or price

- Product line:

a group of product or service items that are closely related because they satisfy a class of needs, are used together, are sold to the same customer group, are distributed through the same outlets, or fall within a given price range�a broad product line e

- Product mix

consists of all the product lines offered by an organization


- Continuous innovation: consumers don't need to learn new behaviors�no need to reeducate customers, mainly depends on generating awareness�requires no new learning by consumers, marketing strategy is to gain consumer awareness and wide distribution
- Dyn

- Protocol

ideally new product or service needs a precise protocol, which is a statement that before product development begins identifies 1. A well-defined target market, 2. Specific customers' needs, wants, preferences, and 3. What the product will be and do to sa

NPP (more extensive version)

- New product process: the seven stages an organization goes through to identify business opportunities and convert them into salable products or services (new product strategy development, idea generation, screening and evaluation, business analysis, dev

product failure/ assuming risk

New grocery products pose special commercialization problems because shelf space is so limited many supermarkets require a slotting fee for new products: a payment a manufacturer makes to place a new item on a retailers shelf�EXPENSIVE!
- If a new grocery

Brand equity

The added value a given brand name gives to a product beyond the functional benefits provided.
"CadburySchweppesacquiredHiresandCrush soda lines from P&G for $220MM.
$ 20MM physical assets $200MM "brand value"
Key Elements of Brand Equity:
� � �
Brand Aw

line extension, brand extension, subbranding, cobranding

Line Extension - Using the same brand name to enter a new market segment within its product class.
Brand Extension - Using a current brand name to enter a completely different product class.
Subbranding - Combining a family brand with a new brand name.


- Occurs when a product is introduced to its intended target market
- Sales grow slowly, and profit is minimal
- Lack of profit is often the result of large investment costs in product development
- Marketing objective at this sage is to create consumer a


- Characterized by rapid increases in sales, in this stage competitors first appear
- The result of more competitors and more aggressive pricing is that profit usually peaks during the growth stage
- Advertising shifts emphasis to stimulating selective de


- Characterized by a slowing of total industry sales or product class revenue
- Marginal competitors begin to leave the market
- Sales increase at a decreasing rate in the maturity stage as fewer new buyers enter the market
- Profit declines due to fierce


- Occurs when sales drop
- Products usually enter decline stage due to environmental changes
- Tend to consume a disproportionate share of management and financial resources relative to their future worth
- To handle a declining product: deletion or harve

Four Aspects of the Product Life Cycle

- Length, the shape of their sales curves, how they vary with different levels of products, and the rate at which consumers adopt products
1. Length of the Product Life Cycle
- As a rule, consumer products have shorter life cycles that business products

reasons to reposition

- A competitor's entrenched position is adversely affecting sales and market share
- To reach a new market
- To catch a rising trend (health consciousness/environmental concerns)


an organization uses a name, phrase, design, symbols, or combination of these to identify its products and distinguish them from those of competitors

Brand name

any word, device, (design, sound, shape, or color) or combination of these used to distinguish a seller's goods or services

Trade name

a commercial, legal name under which a company does business


identifies that a firm has legally registered its brand name or trade name so the firm has its exclusive use, thereby preventing others from using it (US Patent and Trademark Office and protected under the Lanham Act)
- Consumers can benefit from branding

- Brand personality

: a set of human characteristics associated with a brand name. Consumers assign personality traits to products�traditional, a romantic, rugged, sophisticated, rebellious�and choose brands that are consistent with their own or desired self-image

- Brand equity

the added value a brand name gives to a product beyond the functional benefits provided; the premium a consumer will pay for one brand over another when the functional benefits provided are identical�two distinct advantages: 1. Brand equity provides a com

Creating Brand equity

- Resides in the minds of consumers and results from what they have learned, felt, seen, and heard about a brand over time
- Four Steps to build brand equity 1. Develop positive brand awareness and an associate of the brand in consumers' minds with a prod

- Brand Licensing

a contractual agreement whereby one company (licensor) allows its brand name(s) or trademark(s) to be used with products or services offered by another company (licensee) for a royalty or fee

Branding strategies:

multiproduct branding, multibranding, private branding, or mixed branding
Multiproduct branding: a company uses one name for all its products in a product class (family branding or corporate branding) hen the company's trade name is used, the company's tr

- Packaging

refers to any container in which it is offered for sale and on which label information is conveyed

- Label

an integral part of the package and typically identifies the product or brand, who made it, where and when it was made, how it is to be used, and package contents and ingredients
Creating customer value and competitive advantage through packaging and labe

Packaging and Labeling Challenges and responses
Four challenges

1. The continuing need to connect with customers: packages and labels must be continually updated to connect with customers�try to create aesthetic and functional design features that attract customer attention and deliver customer value in their use
2. E

Marketing Channel:

Individuals and firms involved in the process of making a product or service available for use or consumption.
! !Performs work of moving goods from producers to consumers.
Overcomes critical time, place and possession gaps that separate goods and service

Functions of Intermediaries:

Transactional - Buying, selling, risk-taking Logistical - Gather, store, disperse products Facilitating - Market information, grading, financing
some purchase items from the seller, store them and resell them. Others sell them to wholesalers then the whol

Dual Distribution:

Reach different buyers by using two or more different types of channels for the same basic product.
Reduce Channel Conflict:
Explain the basis or rationale for dual distribution to channel members.
Guide resellers to separate end-user markets.
Provide sli

Vertical Marketing Systems

- Producer, wholesaler(s), retailer(s) act as a unified system.
! !Either one channel member owns the others, franchises them, or has so much power that they all cooperate.
VMS came into being to control channel behavior. Economies achieved through their

Channel choice considerations

1. Target market coverage a. Intensive distribution b. Selective distribution c. Exclusive distribution
2. Buyer requirements a. Information b. Convenience c. Variety
d. Attendant services
3. Profitability a. Total revenue b. Total costs

Target Market Coverage - Distribution Density

Intensive Distribution - Maximum brand exposure and consumer convenience.
Selective Distribution - Adequate market coverage with more control and less cost than intensive distribution.
Exclusive Distribution - Only one outlet in specified geographic area.

Horizontal conflict:

Conflict between intermediaries at the same level in a marketing channel.
Sources of conflict:
Manufacturer increases distribution coverage in a geographical area
Dual distribution

Vertical Conflict

Vertical conflict: Conflict between levels in the same marketing channel.
Sources of conflict:
Disintermediation - Channel member bypasses another member and sells and buys products direct
Profit margin distribution among channel members
Manufacturer beli

Electronic marketing channels

: employ the internet to make products and services available for consumption or use by consumers or organizational buyers (combine electronic and traditional intermediaries to create time place, form and possession utility for buyers)
- Can and do perfor

- Multichannel marketing

the blending of different communication and delivery channel that are mutually reinforcing in attracting, retaining, and building relationships with consumers who shop and buy in traditional intermediaries and online

- Dual distribution:

an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product�minimizes cannibalization of the firms family brand and differentiate channels (when firms pair multiple cannels with a

- Vertical marketing systems

professionally managed and centrally coordinated marketing channels designed to achieve channel economics and maximum marketing impact (corporate, contractual, and administered)--- to improve efficiency in performing channel functions and achieve greater

Test market coverage

- Requires attention to the density that is the number of stores in a geographical area and type of intermediaries - three degrees of distribution: intensive, exclusive, and selective
- Intensive distribution: means that a firm tries to place its products

Buyer requirements:

information, convenience, variety, and pre or post sale services
- Information (need well trained intermediaries when buyers have limited knowledge or desire specific data about a product or service)
- Convenience (proximity, driving time) Internet conven


- Important in choosing a channel, determined by the margins earned (revenue minus cost) for each channel member and for the channel as a whole
- Channel cost: distribution, advertising, selling expenses associated with different types of marketing channe

sources of conflict

- Channel conflict: arises when one channel member believes another channel member is engaged in behavior that prevents it from achieving its goals (vertical and horizontal)
- Vertical conflict: occurs between different levels in a marketing channel (manu

Securing cooperation in marketing channels

- Channel captain: a channel member that coordinates, directs, and supports other channel members" can be producers, wholesalers, or retailers�ability to influence the behavior of other members--- economic influence arises from the ability of a firm to re