1. foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. The Market Segmentation Process 4

2. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Objectives 1.Explain the factors underlying market segmentation strategy choices. 2.Outline the stages in the market segmentation process. 3.Explain the concept of positioning within market segments. 4.Show how target market decision analysis can be used in market segmentation. 5.Show how target market decision analysis can be used to assess the assortment of products offered to the market. 4 The Market Segmentation Process 4-1

3. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Alternative Market Matching Strategy 1.Company resources 2.Differentiability of products 3.Stage in product life cycle 4.Competitors strategies 5.Size of segment 4 The Market Segmentation Process 4-2

4. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Segmentation Strategies MARKET SMALL OR FOCUSEDLARGE STRATEGYMARKETMARKET Multi-offerHigh value nicheDifferentiated (Many products)e.g.,Custom home e.g., Ford Motor Co. builders Single-offerConcentratedMass marketing (One product)e.g., Jolt Cola(Undifferentiated) e.g., Magic ® Baking Powder 4 The Market Segmentation Process Figure 4.1 4-3

5. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Single-Offer Strategy The attempt to satisfy a large or a small market with one product and single marketing program. 4 The Market Segmentation Process 4-4

6. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Multi-Offer Strategy The attempt to satisfy several segments of the market very well with specialized products and unique marketing programs aimed at each segment. 4 The Market Segmentation Process 4-5

7. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Market Matching Strategies (1 of 2) 1908Early 2000s1955Early 2000 MarketSingle-OfferMulti-OfferSingle-OfferMulti-Offer SegmentStrategyStrategyStrategyStrategy General-Purpose Cars SmallModel TFocusBeetleGolf MediumModel TTaurusJetta LargeCrown VictoriaPassat Sporty Cars Low-PricedZX2 Escortnew Beetle GTI Medium-PricedCougarCabrio MustangAudi TT Porsche Boxster High-pricedJaguar XK8Porsche 911 Aston Martin DB7 4 The Market Segmentation Process Table 4.1 PRODUCT OFFERINGS Ford Motor Company Audio/Volkswagen/Porsche 4-6a

8. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Market Matching Strategies (2 of 2) 1908Early 2000s1955Early 2000s MarketSingle-OfferMulti-OfferSingle-OfferMulti-Offer SegmentStrategyStrategyStrategyStrategy Luxury Cars Medium-pricedLincoln ContinentalAudi A4 Lincoln Town Car High-pricedJaguar S-TypeAudi A6 Audi A8 VansWindstarEuroVan Econoline Trucks SmallModel T (Truck)Ford Ranger MediumFord F series Sport Utility VehiclesExplorer (SUVs)Expedition Excursion Lincoln Navigator 4 The Market Segmentation Process Table 4.1 Ford Motor Company Audio/Volkswagen/Porsche 4-6b

9. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Market Segmentation Decision Process Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 4 The Market Segmentation Process Figure 4.1 Select target market segment(s). Do benefits achieve company goals and justify development of each segment? Estimate cost benefit for each segment. Forecast own market share for each segment. Analyze competitive forces within each segment. Determine marketing program to serve each segment. Forecast total market potential for each segment. Develop relevant market segment profiles. Identify bases for segmenting markets. 4-7

10. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Target Market A market segment that a company chooses to serve. 4 The Market Segmentation Process 4-8

11. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Target Market Decision Analysis The evolution of potential market segments. 4 The Market Segmentation Process 4-9

12. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. The Divide-the-Box Procedure 4 The Market Segmentation Process Figure 4.3 The Market Divided into Segments The Entire Market 4-10

13. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Hypothetical Divide-the-Box Example for Radio 4 The Market Segmentation Process Figure 4.4 The Market Segment for Radio by Age & Benefit Age Benefit Teens Middle Adults Senior Young Adult Information Entertainment Companionship The Entire Market for Radio 4-11

14. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Hypothetical Middle Adult Segment for Radio 4 The Market Segmentation Process Figure 4.5 Early Retiree Hourly Employee Business Owner Professional Information XXX Entertainment XX Companionship X Desired Benefit Middle Adults 4-12

15. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Hypothetical Middle Adult Segment for Information Radio 4 The Market Segmentation Process Figure 4.6 Early Retiree Hourly Employee Business Owner Professional Breaking news XX Political commentary XX Financial market commentary XXX Desired Information Focus Advice XX Weather XX Call-in X Gossip X Middle Adults 4-13

16. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Product Mix The assortment of product lines and individual offerings available from a company. 4 The Market Segmentation Process 4-14

17. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Using Target Market Decision Analysis to Evaluate a Product Mix 4 The Market Segmentation Process Figure 4.7 BelongersEtc.Achievers Romantic Phone M Phone A Phone C Character Phone R Phone Y Contemporary Product Offering Psychographic Category 4-15 Source: Properly applied Psychographics Add Marketing Luster, Marketing News (November 12, 1982), p. 10. Reprinted with permission by the American Marketing Association.

18. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Hypothetical Positioning Map: CBC versus Commercial Radio 4 The Market Segmentation Process Figure 4.8 InformationalMusic Challenging Entertaining Commercial Talk Radio Commercial Talk Radio *As it Happens CBC local* *This Morning After Hours* *CBC News *Ideas Disc Drive* Take 5* 4-16

19. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Positioning Shaping the product and developing a marketing program in such a way that the product is perceived to be (and actually is) different from competitors products. 4 The Market Segmentation Process 4-17

20. Chapter Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Positioning Map of Cola Market 4 The Market Segmentation Process Figure 4.9 Well-Known Brand/Quality Lower Price Higher Price Unknown Brand/Quality Cott Cola Presidents Choice Z Cola Private-label store brands Coca-Cola/Pepsi 4-18