Chapter 7: Segmentation, Targeting and Positioning
Segmentation – identifying meaningfully different groups of customers.
Targeting – selecting which segment(s) to serve.
Positioning – implementing chosen image and appeal to chosen segment.
Market Segment – a group of customers who share a similar set of needs and wants
within an overall market.
Market Segmentation – the process of identifying and categorizing the overall market
into groups of customers with similar needs and wants.
Target Market – the qualified available market segment that the company pursues.
Step 1: Establish Overall Strategy or Objectives
Articulate the mission and the objectives of the company’s marketing strategy
Derived from its strengths, weaknesses, opportunities and threats (SWOT).
Step 2: Segmentation Bases
Formal approach to segment the market.
Develops descriptions of the different segments, their needs, wants and
Geographic Segmentation: organizes consumers into groups of where they live.
Demographic Segmentation: groups consumers according to easily measured objective
characteristics (mentioned in graph).
Psychographic Segmentation: explores into how consumers describe themselves by
using characteristics that help them choose how they occupy their time (behaviour) and
what reasons determine their choices.
Selfvalues life goals
Selfconcept how one sees oneself in the context of the goals
Lifestyles the ways that one lives Behavioural Segmentation: groups consumers on the basis of the benefits they derive
from products/services, their usage rates of products/services, their user status, and their
Benefit Segmentation: based on the benefits consumers derive from products/services.
Step 3: Evaluate Segment Attractiveness
Involves evaluating the attractiveness of the various segments.
Identifiable who is within their market to be able to design products or services to meet
Reachable accessed through persuasive communications and product distribution
Responsive consumers in the segment must react similarly and positively to offerings
through distinctive competencies
Substantial and Profitable measure the target market’s size and growth potential
Step 4: Select Target Market
The marketer’s ability to pursue such an opportunity or target segment.
Selecting which segment(s) to serve.
Undifferentiated Segmentation Strategy (Mass Marketing): if the product or service
is perceived to provide the same benefits to everyone with no need to develop separate
strategies for different groups.
Differentiated Segmentation Strategy: target several market segments with a different
offering for each.
Concentrated (Niche) Segmentation Strategy: selecting a single, primary target
market and focusing all energies on providing a product to fit that market’s needs.
Micromarketing (onetoone): extreme form of segmentation that tailors a
product/service to suit an individual customer’s wants or needs.
Mass Customization: interacting onetoone basis with many people to create custom
Step 5: Identify and Develop Positioning Strategy
Positioning is the mental picture that people have about a company and its
products/services relative to competitors and involves a process of defining the
marketing mix variables.
Positioning statement is how the company wants to be perceived, includes target
market characteristics, customer need & benefit, point of differentiation or unique
selling proposition (USP).
Types of Positioning Strategies: Value
Benefits and Symbolism
Brand Repositioning: refers to a strategy in which marketers change a brand’s focus to
target new markets or realign the brand’s core emphasis with changing market
Chapter 8: Developing New Products
Product: anything that is of value to a consumer and can be offered through a marketing
Innovation: the process by which ideas are transformed into new products and services
that will help firms grow.
Changing consumer needs create and deliver value effectively by adding new products
and satisfying the changing needs
Market Saturation the longer a product exists in the marketplace; the more likely the
market will become saturated (the decline stage) Innovation & Value
First movers: product pioneers that are the first to create the market or product
category, making them recognizable to consumers = establishing a commanding
and early market share.
Adoption of Innovation:
The process by which the use of innovation, whether a product or service, spreads
throughout a market group.
Innovators: those buyers who want to be the first to have the new product or service.
Early Adopters: buyers that begin to use the product or service innovation.
Early Majority: 34% percent of the population; wait until all the bugs are worked out.
Late Majority: last group of buyers to enter a new product market; product has achieved
its full market potential.
Laggards: consumers who like to avoid change and rely on traditional products until
they are no longer available.
Using the Adoption Cycle
Predict the types of customers who will buy their new product or service.
Develop effective promotion, pricing. Relative Advantage if a product is perceived as better than substitutes, the diffusion will
Compatibility make decisions in a timely manner and to able to communicate their
Observability when products are easily observed, their benefits and uses are easily
communicated to others = enhancing the diffusion process
Complexity and Trialability products are that relatively less complex are easy to try
Product Development Process
Internal Research & Development
Collaborating with other firms & institutions
Competitors’ Products & Services (Reverse engineering: take apart competitor’s
product, analyze it, and create an improved product)
Customer Input: successful, must analyze lead users (innovative product users
who modify existing products to suit their needs)
Concept Testing: Concepts: brief written descriptions of product or service; its technology,
working principles, and forms; and what customer needs it would satisfy.
Concept testing: refers to the process in which a concept statement is presented
to potential buyers to obtain their reactions.
Entails a process of balancing various engineering, manufacturing, marketing, and
economic considerations to develop a product’s form and features or a service’s
Prototype: the first physical form or service description of a new product that has
the same properties as a new product through different manufacturing processes.
Alpha testing: an attempt by the firm to determine whether a product will
perform according to its design and whether it satisfies the need for which it was
intended; at the R&D.
Beta testing: having potential consumers examine a product prototype in realuse
setting to determine its functionality, performance, potential problems.
Test the market for the new product with a trial batch of products.
Premarket Tests: conducted before a product or service is brought to market to
determine how many customers will try and then continue to use it.
Test marketing: introduces a new product or service to a limited geographical
area prior to a national launch.
Introduce new product to market.
Promotion: determine appropriate integrated marketing communications
strategies; provide for more consumer education about the product’s benefits for
more complex products.
Place: have adequate quantity of products available.
Price: ensure the price is right.
Timing: depending on the product, time is key – seasonal products.
The Product Life Cycle:
The product life cycle defines the stages that new products move through as they
enter, get established and leave the marketplace. Introduction Stage: stage of the product life cycle when innovators start buying the
product; define their own product category and industry.
Growth Stage: stage of the product life cycle when the product gains acceptance,
demand and sales increases, and competitors emerge in the product category.
Maturity Stage: stage of the product life cycle when industry sales reach their peak;
firms may add new features or reposition them.
Decline Stage: stage of the product life cycle when sales decline and product leaves the
Chapter 9: Product, Branding and Packaging Decisions Complexity of Products and Types of Products
Complexity of Products
There’s more to the product than just its physical characteristics or its basic
Core customer value: the basic problemsolving benefits that consumers are
Associated services: aka augmented product, includes the nonphysical attributes
of the product such as warranties, financing, service, support.
Types of Products
Consider the types of products that is designed and being sold because it impacts
how it is promoted, priced and distributed.
Consumer products: products and services used by people for their personal use.
Specialty Products/Services: products and services that customers show a strong
preference that they will expend considerable effort to search for the best suppliers.
Shopping Products/Services: products and services such as furniture, apparel,
fragrances, appliances and travel alternatives, that consumers will spend a fair amount of
time comparing alternatives.
Convenience Products/Services: products and services that consumers are not willing to
spend any effort to evaluate prior to purchase.
Unsought Products/Services: products and services that consumers either do not
normally think of buying or do not know about.
Product Mix and Product Line Decisions
Product Mix: complete set of all products offered by a firm.
Product Lines: groups of associated items that consumers use together or think of as part
of a group of similar products.
Product Category: an assortment of items that the customer sees as a reasonable
substitute for one another.
Brand: the name, term, design, symbol, or any other feature that identify a seller’s good
or service as distinct from others.
Product Mix Breadth: the number of product lines or variety offered by a firm.
Product Line Depth: the number of categories within a product line. Stock Keeping Units (SKUs): individual items within each product category; the
smallest unit available for inventory control.
Change in Product Mix Breadth
Add or delete entire product line.
Increase Breadth: add new product lines to capture new or evolving markets,
increase sales and compete in new venues.
Decrease Breadth: delete entire product line to address changing market
conditions or meet internal strategic priorities.
Change in Product Line Depth
Add or delete from their product line depth.
Increase Depth: add new products within a line to address changing consumer
preferences or preempt competitors while boosting sales.
Decrease Depth: delete product categories to realign resources.
Change in SKUs
Common to add or delete of SKUs in existing categories to stimulate sales or
react to consumer demand.
Provides a way for a firm to differentiate its product offerings from competitors.
What makes a brand?
Logos and symbols
Value of Branding for Consumers and Marketers
Brands add value to merchandises and services beyond physical and functional
characteristics or the act of service.
Brands Facilitate Purchasing: brands are often easily recognizable by customers, and
signify certain quality level and contain familiar attributes = help consumers make
Brands Establish Loyalty: over time, consumers learn to trust certain brands; maintain
great depth in product lines.
Brands Protect from Competition: some strong brands are protected from competition;
more established in the market and a more loyal customer base. Brands Reduce Marketing Costs: wellknown brands can spend less on marketing
Brands are Assets: brands can be legally protected through trademarks and copyrights;
constitute a unique ownership.
Brands Impact Market Value: wellknown brands have direct impact on the company’s
The set of assets and liability linked to a brand that add or subtract from the value
provided by the product/service.
Brand awareness: measures how many consumers in a market are familiar with
the brand and what it stands for, have an opinion about that brand.
Perceived value: the relationship between a product or service’s benefits and its
Brand associations: reflect the mental links that consumers make between a
brand and its key attributes, such as logo, slogan or famous personality.
Brand personality: refers to set of human characteristics associated with the
brand, which has symbolic or selfexpressive meaning to consumers.
Brand loyalty: occurs when consumers buy the same product/service repeatedly
Introduce a variety of brandrelated strategies to create and manage key brand
assets, such as decision to own brands, establish a brand policy, extend brand
name to other products and markets, cooperatively use brand name with others
and licensing brands to others.
Brand Ownership Strategies
Any firm in supply chain; manufacturers, wholesalers, and retailers can own
Manufacturer/national brands: owned and managed by the manufacturer; have
more control over marketing strategy, choose market segments and position the
brand and build brand loyalty.
Private labels/store brands: brands that are owned and managed by retailers;
common in supermarkets, discount stores, and drugstores.
Generic: products without brand.
Brand Name Strategies
Corporate or Family Brand: the use of a firm’s corporate name to brand all of
its product lines and products. Corporate and Product Line Brands: the use of a combination of family brand
name and individual brand name to distinguish a firm’s product.
Individual Brands: the use of individual brand names for each of its product.
Refers to the use of the same brand name for new products being introduced to
the same or new markets.
Brand dilution: occurs when the brand extension negatively affects consumer
perceptions about the attributes the core brand holds.
The practice of marketing two or more brands together, on the same package or
A contractual arrangement between firms where one is allowed to use another
brand name, logo, symbols, etc. for a fee.
Common for toys, apparel, video games, accessories, entertainment.
Important brand element with more tangible or physical benefits; offers a variety
of benefits to consumers, who seek for convenience in terms of storage, use and
Provides information the consumer needs for their decision and consumption of
Important element for branding and promotion.
Chapter 11: Pricing Concepts and Strategies: Establishing Value
The Five Cs of Pricing Company Objectives
Profit orientation: focus on target profit pricing (pricing strategy, particular
profit goal), maximizing profits (captures all the factors required to explain and
predict sales and profits) or tax return pricing (pricing strategy, less concerned
with absolute level of profits, produce a return on investment).
Sales orientation: increasing sales to increase profits.
Competitor orientation: measure itself against its competition.
Competitive parity: set prices that are similar to major competitors.
Customer orientation: explicitly invokes the concept of consumer expectations.
Understanding consumers’ reactions to different prices.
Consumers want value; price is half the value equation.
Demand Curve: shows how