April 6, 2022

Put yourself in the position of an entrepreneur who is developing a new product to introduce into the market (a new backpack). Briefl

1- Put yourself in the position of an entrepreneur who is developing a new product to introduce into the market (a new backpack). Briefly describe the product and each component of its value proposition. (Minimum 300 words)

2- Suppose Domino’s wants to open a new restaurant. What are some secondary sources of information that might be used to conduct research on potential new locations? Describe how these sources might be used. Describe a method Domino’s could use to gather primary research on prospective locations. Do you think Domino’s should conduct the primary or secondary source research first? Why? (Minimum 400 words)

Because learning changes everything.®

Chapter 9

Segmentation, Targeting,

and Positioning

Learning Objectives

Learning Objective 9.1 Outline the different methods of

segmenting a market.

Learning Objective 9.2 Describe how firms determine

whether a segment is attractive and therefore worth

pursuing.

Learning Objective 9.3 Articulate the difference among

targeting strategies: undifferentiated, differentiated,

concentrated, or micromarketing.

Learning Objective 9.4 Determine the value proposition.

Learning Objective 9.5 Define positioning and describe

how firms do it.

The Segmentation, Targeting, and Positioning Process

EXHIBIT 9.1 The Segmentation, Targeting, and Positioning (STP) Process

Access the text alternative for slide images.

McGraw-Hill Global Education Holdings, LLC 4

Step 1: Establish the Overall Strategy or Objectives

Derived from mission

and objectives

Consistent with

SWOT

Food marketers, for instance,

divide the traditional pasta sauce

landscape into with or without

meat. This segmentation method is

based on what consumers derive

from the products.

Shutterstock/svario photo 5

Step 2: Use Segmentation Methods

EXHIBIT 9.2 Methods for Describing Market Segments

Segmentation Method Sample Segments

Geographic

Continent: North America, Asia,

Europe, Africa

Within the United States: Pacific,

mountain, central, south, mid-

Atlantic, northeast

Demographic Age, gender, income, education

Psychographic Lifestyle, self-concept, self-values

Benefit Convenience, economy, prestige

Behavioral Occasion, loyalty

McGraw-Hill Global Education Holdings, LLC 6

Geographic Segmentation

Market could be grouped by:

Country.

Region.

• Northeast, Southeast.

Areas within region.

• State, city,

neighborhoods, zip

codes.

Most useful for companies whose

products satisfy needs that vary

by region.

Shutterstock/tovovan 7

Demographic Segmentation

Most common

segmentation strategy.

Easy to identify.

Easy to measure (age,

gender, income,

education).

Shutterstock / astel design 8

Adding Value 9.1 Dealing with Modern Life by Playing: LEGO Promises

LEGO is targeting its

bricks and building sets

as the perfect respite for

this demographic

segment, frazzled adults

who just want a break

from modern life.

The casual adult builder

is the new demographic

segment for LEGO. LEGO’s latest market segment: frazzled adults seeking to reduce stress with easy-to-build projects like this

25th anniversary set depicting the Central Perk coffee

shop from the TV sitcom Friends.

Ekaterina Minaeva/Alamy Stock Photo 9

Psychographic Segmentation

How consumers

describe themselves

in terms of:

• Self values.

• Lifestyle.

• Self-concept.

Shutterstock / Zoriana Zaitseva 10

Benefit Segmentation

Dividing the market into

segments whose needs

and wants are best

satisfied by the product’s

benefits can be a very

powerful tool.

How does the movie

industry use a benefit

segmentation strategy?

LI CHAOSHU/Shutterstock 11

Behavioral Segmentation

Occasion segmentation:

• Based on when a product or

service is purchased or

consumed.

• Clothing, snack foods.

Loyalty segmentation:

• Loyal customers are the

most profitable in the long

term.

• Hotels, airlines,

restaurants (Starbucks).

Shutterstock / JHershPhoto 12

Using Multiple Segmentation Methods : Exhibit 9.4 Examples of Tapestry

Tapestry ™ uses a combination of geographic, demographic,

and lifestyle characteristics to classify consumers.

A table divided into four columns

summarizes the examples of the

Tapestry Segmentation System. The

column headers for columns 2 to 4 are

marked as: Segment 01-Top Rung;

Segemnet-18, Cozy and comfortable;

and Segment-52, Inner city tenants.

McGraw-Hill Global Education Holdings, LLC 13

PROGRESS CHECK (1 of 2)

1. What are the various segmentation methods?

Step 3: Evaluate Segment Attractiveness

EXHIBIT 9.5 Evaluate Segment Attractiveness

Identifiable

Who is in their market?

Are the segments

distinct from one

another?

Does each segment

require a unique

marketing mix?

estherpoon/Shutterstock.com 16

Substantial

How large is the market

segment in terms of size

and buying power?

If a market segment is too

small, it won’t generate

sufficient profits.

If its buying power is

insignificant, despite its size,

the marketing mix cannot be

supported.

Photodisc/Getty Images 17

Reachable

Can the market be reached through persuasive

communication and product distribution?

The consumer must:

• Know the product exists.

• Understand what it can do.

• Recognize how to buy.

Shutterstock/faithie 18

Responsive

Customers must react similarly and positively to the

firm’s offering.

If a firm cannot provide products and services to

the segment, it shouldn’t be targeted.

If you are looking for a luxury sedan, General Motors hopes you

will choose a Cadillac.

Darren Brode/Shutterstock 19

Profitable

Assess potential profitability of each segment, both

current and future.

Key factors:

• Current market growth rate.

• Future growth rate.

• Market competitiveness.

• Market access costs.

Shutterstock/jeff Metzger 20

How to Determine the Profitability of a Segment

Segment = Children under 15

• Segment size = 60

million (<15 yrs).

• Segmentation Adoption

Percentage = 35%.

• Purchase Behavior =

$500

× 1 time purchase.

• Profit margin % = 10%.

• Fixed Cost = $50M.

Is this segment profitable?

Tanya Constantine/Blend Images LLC 21

Exhibit 9.6: Profitability of Two Market Segments for Camillo’s Lawn Service

Homeowners Businesses

Segment size 75,000 1,000

Segment adoption

percentage 1% 20%

Purchase behavior

Purchase price

Frequency of purchase

$100

12 times

$500

20 times

Profit margin percentage 60% 80%

Fixed costs $400,000 $1,000,000

Segment profit $140,000 $600,000

Step 4: Select a Target Market

The key factor is the

marketer’s ability to

pursue the market.

Four different targeting

strategies can be used.

Step 5: Identify and Develop Positioning Strategy

Market positioning

• Defining marketing mix variables so target customers

have a clear, distinctive, desirable understanding of

what the product does.

Value proposition

• Communicates the customer benefits to be received

from a product or service.

Exhibit 9.8: Circles for a Successful Value Proposition (1 of 2)

Part A. No Overlap with Competition

Exhibit 9.8: Circles for a Successful Value Proposition (2 of 2)

Part B. Determining the Value Proposition

#1: Firm’s value proposition.

#2: Customer’s unmet needs (marketing opportunity).

#3: Firm’s benefits that are not required—educate customer or redesign product.

#4: Key benefits that both the firm and competitor provide that customers require—

carefully monitor performance relative to competitor on these benefits.

#5: Competitor’s value proposition—monitor and imitate if needed.

#6: Benefits both firms provide that customers do not appear to need.

#7: Competitor benefits that are not required.

Access the text alternative for slide images.

Exhibit 9.9: Value Proposition Statement Key Elements

Gatorade 7UP

Target market Athletes around the

world

Non-cola consumers

Offering name or brand Gatorade 7UP

Product/service category or concept Sports drink Non-caffeinated soft

drink

Unique point of difference/benefits Represents the heart,

hustle, and soul of

athleticism and gives

the fuel for working

muscles, fluid for

hydration, and

electrolytes to help

replace what is lost in

sweat before, during,

and after activity to

get the most out of

your body

Light, refreshing,

lemon-lime flavored,

and has a crisp,

bubbly, and clean

taste.

Positioning Methods

• Value.

• Salient Attributes.

• Symbols.

• Competition.

KIND and PowerBar both offer their respective target

markets good value. KIND bars (top) are made with natural

ingredients, all of which are pronounceable, thus supporting

a healthy lifestyle. PowerBars (bottom) are protein bars

designed to improve the performance of athletes.

What are the value propositions for Gatorade and 7UP?

McGraw-Hill Global Education Holdings, LLC 28

Positioning Using Perceptional Mapping

A perceptual map

displays, in two or more

dimensions, the position

of products or brands in

the consumer’s mind.

Ideal Points: Where a

particular market

segment’s ideal product

would lie on the map.

alphababy/123RF 29

Perceptual Maps (1 of 2)

EXHIBIT 9.10A Perceptual Map, Chart A EXHIBIT 9.10B Perceptual Map, Chart B

Access the text alternative for slide images.

Perceptual Maps (2 of 2)

EXHIBIT 9.10C Perceptual Map, Chart C EXHIBIT 9.10D Perceptual Map, Chart D

Access the text alternative for slide images.

Six Positioning Steps to Derive a Perceptual Map

1. Determine consumers’ perceptions and

evaluations in relation to competitors’.

2. Identify the market’s ideal points and size.

3. Identify competitors’ positions.

4. Determine consumer preferences.

5. Select the position.

6. Monitor the positioning strategy.

PROGRESS CHECK (2 of 2)

1. What is a perceptual map?

2. Identify the six positioning steps.

Because learning changes everything.®

www.mheducation.com

Because learning changes everything.®

Chapter 10

Marketing Research

Learning Objectives

Learning Objective 10.1 Identify the five steps in the marketing research process.

Learning Objective 10.2 Describe the various secondary data sources.

Learning Objective 10.3 Describe the various primary data collection techniques.

Learning Objective 10.4 Summarize the differences between secondary research and primary research.

Learning Objective 10.5 Identify the 5 Vs of big data.

Learning Objective 10.6 Examine the characteristics of marketing analytics.

Learning Objective 10.7 Examine the circumstances in which collecting information on consumers is ethical.

Marketing Research

Exhibit 10.1: The Marketing Research Process

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Step 1: Defining Objectives and Research Needs

What information is needed to answer specific

research questions?

How should that information be obtained?

Step 2: Designing the Research

Determine type

of research

needed to obtain

data.

Identify type of

data needed.

Shutterstock / Gorodenkoff 7

Step 3: Collecting the Data

Secondary Data

• Collected prior to the start of the research project.

• External as well as internal data sources.

Primary Data

• Collected to address specific research needs.

• Examples: focus groups, in-depth interviews, surveys.

• Sample: Choose a group of customers who represent

the customers of interest and generalize their opinions

to the market segment.

Step 4: Analyzing the Data and Developing Insights

Converting data into

information that is

useful in making more

effective marketing

decisions.

Tom Davenport Interview on Business Analytics

Gorodenkoff/Shutterstock 9

https://www.youtube.com/watch?v=CStxyj0tJ6g

What Insights Can You Develop by Analyzing this Data?

EXHIBIT 10.3 Survey Results for McDonald’s and Wendy’s

Access the text alternative for slide images.

McGraw-Hill Global Education Holdings, LLC 10

Step 5: Developing and Implementing an Action Plan

PROGRESS CHECK (1 of 7)

1. What are the steps in the marketing research

process?

2. What is the difference between data and

information?

Secondary Data

A marketing research project often begins with a

review of the relevant secondary data.

Shutterstock / Iakov Filimonov 13

Exhibit 10.4: External Secondary Data Syndicated Data and Some of Their Services (1 of 2)

Name Services Provided

Nielsen

(http://www.nielsen.com)

With its Market Measurement Services, the company

tracks the sales of consumer packaged goods, gathered at

the point of sale in retail stores of all types and sizes.

IRI

(http://www.iriworldwide.com)

InfoScan store tracking provides detailed information about

sales, share, distribution, pricing, and promotion across a

wide variety of retail channels and accounts.

JD. Power and Associates

(http://www.jdpower.com)

Widely known for its automotive ratings, it produces quality

and customer satisfaction research for a variety of

industries.

NDP Group

(www.npd.com)

Based on detailed records consumers keep about their

purchases (i.e., a diary), it provides information about

product movement and consumer behavior in a variety of

industries.

Access the text alternative for slide images.

http://www.nielsen.com/

http://www.iriworldwide.com/

http://www.jdpower.com/

Exhibit 10.4: External Secondary Data Syndicated Data and Some of Their Services (2 of 2)

Table divided into two columns summarizes continuation of syndicated

data providers and some of their services. The column headers are

marked from left to right as: name and services provided.

Name Services Provided

NOP World

(http://www.nopworld.com)

The mKids US research study tracks mobile

telephone ownership and usage, brand affinities,

and entertainment habits of American youth

between 12 and 19 years of age.

Research and Markets

(http://www.researchandmarkets.

com)

Promotes itself as a one-stop shop for market

research and data from most leading publishers,

consultants, and analysts.

Roper Center for Public Opinion

Research

(http://www.ropercenter.uconn.ed

The General Social Survey is one of the nation’s longest

running surveys of social, cultural, and political indicators.

http://www.nopworld.com/

http://www.researchandmarkets.com/

http://www.ropercenter.uconn.edu/

External Secondary Data Scanner Data

Data from scanner readings

of UPC labels at checkout.

Provided and sold by

leading research firms:

• IRI.

• Nielsen.

Information helps firms

assess what is happening in

the marketplace.

jamie_cross/123RF 16

PROGRESS CHECK (2 of 7)

1. What is the difference between panel and scanner

data?

Primary Data Collection Techniques

EXHIBIT 10.5 Qualitative versus Quantitative Data Collection

Access the text alternative for slide images.

Observation

Examining purchase and consumption behaviors

Access the text alternative for slide images.

The Brave New World of Shopper-Tracking Technology

http://live.wsj.com/video/the-brave-new-world-of-shopper-tracking-technology/7503B9D6-2F0D-40B8-9684-E293BA3E9207.html#!7503B9D6-2F0D-40B8-9684-E293BA3E9207

In-Depth and Focus Group Interviews

In-Depth interviews

• Trained researchers ask questions

one-on-one with a customer.

• Expensive and time-consuming.

Focus group interviews

• Small group of 8 to 12 people with

a trained moderator.

• Now often take place online.

• Unstructured; qualitative data about

new or existing products or

services.

Although relatively expensive, in-depth interviews

can reveal information that would be difficult to

obtain with other methods.

Wdstock/E+/Getty Images 20

PROGRESS CHECK (3 of 7)

1. What are the types of qualitative research?

Survey Research

The use of surveys or questionnaires.

The most popular type of quantitative primary data

collection method.

A document that features a set of questions

designed to gather information from respondents

that will lead to more effective marketing decisions.

Survey Research Structured vs. Unstructured Questions

EXHIBIT 10.6 Structured versus Unstructured Response

McGraw-Hill Global Education Holdings, LLC 23

Exhibit 10.7: What to Avoid When Designing a Questionnaire (1 of 2)

Issue Good Question Bad Question

Avoid questions the

respondent cannot easily

or accurately answer.

When was the last time

you went to the grocery

store?

How much money did

you spend on groceries

last month?

Avoid sensitive

questions unless they

are absolutely

necessary.

Do you take vitamins? Do you dye your gray

hair?

Avoid double-barreled

questions, which refer to

more than one issue with

only one set of

responses.

1. Do you like to shop for

clothing?

2. Do you like to shop for

food?

Do you like to shop for

clothing and food?

Exhibit 10.7: What to Avoid When Designing a Questionnaire (2 of 2)

Issue Good Question Bad Question

Avoid leading questions,

which steer respondents

to a particular response,

irrespective of their true

beliefs.

Please rate how safe

you believe a BMW is on

a scale of 1 to 10, with 1

being not safe and 10

being very safe.

BMW is the safest car on

the road, right?

Avoid one-sided

questions that present

only one side of the

issue.

To what extent do you

believe fast food

contributes to adult

obesity using a five-point

scale?

1: Does not contribute

5: Main cause

Fast food is responsible

for adult obesity:

Agree/Disagree

Source: Adapted from A. Parasuraman, Dhruv Grewal, and R. Krishnan, Marketing Research, 2nd ed. (Boston: Houghton Mifflin, 2007), Ch. 10. 25

Panel‐ and Scanner‐Based Research

Can be either

secondary or primary

data.

New Balance

encourages people to

join its panel known

as the “New Balance

Tester Community” to

help in the process of

designing new

sneakers.

WAYHOME studio/Shutterstock 26

Experimental Research

Systematically

manipulates one or more

variables to determine

which variables have a

causal effect on other

variables.

Can also be used on

social media. State Bicycle Co. devised experiments to test the efficacy of

several ads to determine which contests and offerings on its

home page would attract visitors who were likely to buy.

Source: State Bicycle Co. 27

Hypothetical Pricing Experiment for McDonald’s

EXHIBIT 10.8 Hypothetical Pricing Experiment for McDonald’s

1 2 3 4 5

Market Unit Price

Market Demand

at Price (in Units)

Total Revenue

(Col. 1 × Col.2)

Total Cost of Units Sold ($300,000

Fixed Cost + $2.00 Variable Cost)

Total Profits

(Col. 3 – Col. 4)

1 $4 200,000 $800,000 $750,000 $100,000

2 5 150,000 750,000 600,000 150,000

3 6 100,000 600,000 500,000 100,000

4 7 50,000 350,000 400,000 (50,000)

Exhibit 10.9: Advantages and Disadvantages of Secondary and Primary Research (1 of 2)

Type Examples Advantages Disadvantages

Secondary

Research

• Census data

• Sales invoices

• Internet information

• Books

• Journal articles

• Syndicated data

• Saves time in

collecting data

because they are

readily available.

• Free or inexpensive

(except for

syndicated data)

• May not be

precisely relevant to

information needs.

• Information may

not be timely.

• Sources may not be

original, and

therefore

usefulness is an

issue.

• Methodologies for

collecting data may

not be appropriate.

• Data sources may

be biased.

Exhibit 10.9: Advantages and Disadvantages of Secondary and Primary Research (2 of 2)

Type Examples Advantages Disadvantages

Primary

Research

• Observation

• Focus groups

• In-depth interviews

• Social media

• Surveys

• Experiments

• Specific to the

immediate data

needs and topic at

hand

• Offers behavioral

insights generally

not available from

secondary research

• Costly

• Time-consuming

• Requires more

sophisticated

training and

experience to

design study and

collect data.

PROGRESS CHECK (4 of 7)

1. What are the types of quantitative research?

Big Data

Big data incorporates multiple sources of data.

Changes in marketing research because of:

• Increase in amount of data.

• Ability to collect data from transactions, CRM, social

media, websites.

• Ease of collecting and storing data.

• Computing ability to manipulate data.

• Access to software to convert data into decision-making

insights (Amazon, SAP, Splunk, GoodData, Google

Analytics.

Internal Secondary Data

Exhibit 10.10: The 5 Vs of Big Data

Access the text alternative for slide images.

PROGRESS CHECK (5 of 7)

1. What are the 5 Vs of big data?

Marketing Analytics

Firms can access big data that contain billions of pieces of customer information and purchase histories from many different sources in a variety of types and sizes.

Marketing analytics is used to make sense out of these data.

To make marketing mix decisions, HSN gathers

data across a wi

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Put yourself in the position of an entrepreneur who is developing a new product to introduce into the market (a new backpack). Briefl

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