1. McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Explain what market segmentation is and when to use it. LO1 Identify the five steps involved in segmenting and targeting markets. Recognize the bases used to segment consumer and organizational markets. LO3 LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO: 9-2

3. Develop a market-product grid to identify a target market and recommend resulting actions. Explain how marketing managers position products in the marketplace. LO4 LO5 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 9, YOU SHOULD BE ABLE TO: 9-3

4.  A Clear Market Segmentation Strategy  Delivering WOW Customer Service ZAPPOS.COM: DELIVERING “WOW” THROUGH MARKET SEGMENTATION AND SERVICE 9-4

5. WHY SEGMENT MARKETS? WHAT MARKET SEGMENTATION MEANS LO1  Product Differentiation Product Differentiation  Market Segmentation Market Segmentation  Market Segments Market Segments  Segmentation: Linking Needs to Actions  The Zappos Segmentation Strategy 9-5

6. FIGURE 9-1 FIGURE 9-1 Market segmentation links market needs to an organization’s marketing program through marketing mix actions 9-6

7. WHY SEGMENT MARKETS? WHEN AND HOW TO SEGMENT MARKETS LO1  One-Size-Fits-All Mass Markets No Longer Exist  One Product and Multiple Market Segments  Multiple Products and Multiple Market Segments “Tiffany/Wal-Mart” Strategies 9-7

8. Sporting News Baseball Yearbook What market segmentation strategy is used? LO1 9-8

9. Harry Potter What market segmentation strategy is used? LO1 9-9

10. Ann Taylor and Ann Taylor Loft What is the danger of a two-segment strategy? LO1 9-10

11. WHY SEGMENT MARKETS? WHEN AND HOW TO SEGMENT MARKETS LO1  Segments of One: Mass Customization Mass Customization Build-to-Order (BTO) 9-11

12. WHY SEGMENT MARKETS? WHEN AND HOW TO SEGMENT MARKETS LO1  The Segmentation Tradeoff: Synergies vs. Cannibalization Organizational Synergy Customer Value Cannibalization 9-12

13. FIGURE 9-2 FIGURE 9-2 The five key steps in segmenting and targeting markets that link market needs to a firm’s marketing program 9-13

14. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS LO2  Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of Assigning Potential Buyers to Segments Potential for Increased Profit Similarity of Needs of Potential Buyers Within a Segment Potential of a Marketing Action to Reach a Segment Difference of Needs of Buyers Among Segments 9-14

15. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS LO3  Ways to Segment Consumer Markets Geographic Segmentation Demographic Segmentation 9-15

16. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS LO3  Ways to Segment Consumer Markets Psychographic Segmentation Behavioral Segmentation  Product Features  Usage Rate or Frequency Marketing Usage Rate or Frequency Marketing  80/20 Rule 80/20 Rule 9-16

17. GOING ONLINE What “Flock” Do You Belong to? LO3 9-17

18. FIGURE 9-3 FIGURE 9-3 Segmentation bases, variables, and breakdowns for U.S. consumer markets 9-18

19. FIGURE 9-4 FIGURE 9-4 Patronage of fast-food restaurants by adults 18 years and older Source: Experian Simmons NCS/NHCS Spring 2009 Adult Full Year Choices 3 System Crosstabulation Report: Based on Visits within the Past 30 Days 9-19

20. FIGURE 9-5 FIGURE 9-5 Comparison of various kinds of users and nonusers for Wendy’s, Burger King, and McDonald’s fast-food restaurants Source: Experian Simmons NCS/NHCS Spring 2009 Adult Full Year Choices 3 System Crosstabulation Report Based on Visits within the Past 30 Days 9-20

21. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS LO3  Variables to Use in Forming Segments Students Nonstudents  Dorms, Sororities, & Fraternities  Faculty & Staff  Apartments  Day Commuters  Night Commuters  Residents in Area  Workers in Area 9-21

22. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 1: GROUP POTENTIAL BUYERS INTO SEGMENTS LO3  Ways to Segment Organizational Markets Geographic Segmentation Demographic Segmentation Behavioral Segmentation 9-22

23. FIGURE 9-6 FIGURE 9-6 Segmentation bases, variables, and breakdowns for U.S. organizational markets 9-23

24. FIGURE 9-7 FIGURE 9-7 Wendy’s new products and innovations target specific market segments based on a customer’s gender, needs, or university affiliation 9-24

25. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 2: GROUP PRODUCTS INTO CATEGORIES LO3  Individual Wendy’s Products Breakfast  Groupings of Wendy’s Products: Meals Lunch Between Meal Snack Dinner After Dinner Snack 9-25

26. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 3: DEVELOP A MARKET-PRODUCT GRID AND ESTIMATE THE SIZE OF MARKETS LO4  Market-Product Grid Market-Product Grid Forming a Market-Product Grid Estimating Market Sizes 9-26

27. FIGURE 9-8 FIGURE 9-8 Selecting a target market for your Wendy’s fast-food restaurant next to an urban university (target market is shaded) 9-27

28. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 4: SELECT TARGET MARKETS LO4  Criteria to Use in Selecting Target Markets  Those That Divide a Market into Segments Two Types of Criteria  Those That Actually Pick the Target Segments 9-28

29. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 4: SELECT TARGET MARKETS LO4  Criteria to Use in Selecting Target Markets Market Size Expected Growth Competitive Position Cost of Reaching the Segment Compatibility with Organizational Objectives and Resources 9-29

30. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 4: SELECT TARGET MARKETS LO4  Choose the Products & Segments No Breakfast Four Student Segments Only 9-30

31. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 5: TAKE MARKETING ACTIONS TO REACH TARGET MARKETS LO4  Immediate Wendy’s Segmentation Strategy Day Commuters Between-Meal Snacks Dinners to Night Commuters  Future Strategies for Wendy’s 9-31

32. FIGURE 9-9 FIGURE 9-9 Advertising actions to market various meals to a range of possible market segments of students 9-32

33. STEPS IN SEGMENTING AND TARGETING MARKETS STEP 5: TAKE MARKETING ACTIONS TO REACH TARGET MARKETS LO4  Apple’s Ever-Changing Segmentation Strategy Marketing Synergies  Market-Product Synergies: A Balancing Act Product Synergies 9-33

34. MARKETING MATTERS Apple’s Segmentation Strategy— Camp Runamok No Longer LO4 9-34

35. POSITIONING THE PRODUCT LO5  Product Positioning Product Positioning Head-to-Head Positioning  Product Repositioning Product Repositioning  Two Approaches to Product Positioning Differentiation Positioning 9-35

36. POSITIONING THE PRODUCT LO5 Identify Important Attributes for a Product or Brand Class  Product Positioning w/ Perceptual Maps Customers’ Ratings of Competing Products or Brands on These Attributes Customer’s Ratings of the Company’s Products or Brands on These Attributes Reposition the Company’s Products or Brands in the Minds of Consumers 9-36

37. POSITIONING THE PRODUCT LO5  Perceptual Map Perceptual Map  A Perceptual Map to Reposition Chocolate Milk for Adults Identify Important Attributes for Adult Drinks Discover How Customers See Chocolate Milk Reposition Chocolate Milk to Make It More Appealing to Adults Discover How Adults See Competing Drinks 9-37

38. FIGURE 9-10 FIGURE 9-10 A perceptual map of the location of beverages in the minds of American adults 9-38

39. FIGURE 9-11 FIGURE 9-11 The strategy American dairies are using to reposition chocolate milk to reach adults 9-39

40. PRINCE SPORTS, INC.: TENNIS RACQUETS FOR EVERY SEGMENT VIDEO CASE 9 9-40

41. FIGURE 1 FIGURE 1 Prince Sports targets racquets at specific market segments 9-41

42. VIDEO CASE 9 PRINCE SPORTS 1. In the 2010s, what trends in the environmental forces (social, economic, technological, competitive, and regulatory) (a) work for and (b) work against success for Prince Sports in the tennis industry? 9-42

43. VIDEO CASE 9 PRINCE SPORTS 2. Because sales of Prince Sports in tennis-related products depends heavily on growth of the tennis industry, what marketing activities might it use in the U.S. to promote tennis playing? 9-43

44. VIDEO CASE 9 PRINCE SPORTS 3. What promotional activities might Prince use to reach (a) recreational players and (b) junior players? 9-44

45. VIDEO CASE 9 PRINCE SPORTS 4. What might Prince do to help it gain distribution and sales in (a) mass merchandisers like Target and Wal-Mart and (b) specialty tennis shops? 9-45

46. VIDEO CASE 9 PRINCE SPORTS 5. In reaching global markets outside the U.S., (a) what are some criteria that Prince should use to select countries in which to market aggressively, (b) what three or four countries meet these criteria best, and (c) what are some marketing actions Prince might use to reach these markets? 9-46

47. Market Segmentation Market segmentation involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. 9-47

48. Market Segments Market segments are the relatively homogeneous groups of prospective buyers that result from the market segmentation process. 9-48

49. Product Differentiation Product differentiation is a marketing strategy that involves a firm using different marketing mix activities to help consumers perceive the product as being different and better than competing products. 9-49

50. Usage Rate Usage rate is the quantity consumed or patronage (store visits) during a specific period. Also called frequency marketing. 9-50

51. 80/20 Rule The 80/20 rule is a concept that suggests 80 percent of a firm’s sales are obtained from 20 percent of its customers. 9-51

52. Market-Product Grid A market-product grid is a framework to relate the market segments of potential buyers to products offered or potential marketing actions by an organization. 9-52

53. Product Positioning Product positioning is the place an offering occupies in consumers’ minds on important attributes relative to competitive products. 9-53

54. Product Repositioning Product repositioning involves changing the place an offering occupies in a consumer’s mind relative to competitive products. 9-54

55. Perceptual Map A perceptual map is a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands, as well as its own product or brand to develop marketing actions to move its product or brand to an ideal position. 9-55