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COURSE TITLE : MARKETING MODULE 5: Segmentation and Positioning
Ashesi University COURSE TITLE : MARKETING SEMESTER : FIRST, 2011/2012 MODULE 5: Segmentation and Positioning Lecturer: Ebow Spio
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Marketing Management Framework
Opportunities Impediments & Solutions Product Price Place Promotion Physical Ev. Process People Execute Target Segment Corporate/Business Objectives Marketing Objectives Sources of Volume/ Business Position Evaluate
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Lesson Outcomes Define the three steps of target marketing: market segmentation, target marketing, and market positioning List and discuss the major bases for segmenting consumer and business markets Explain how companies identify attractive consumer and business markets Discuss how companies position their products for maximum competitive advantage in the marketplace
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Steps in Segmentation, targeting and positioning
Select Customers to Serve Decide on value proposition Segmentation Divide the total market into Smaller segments Differentiation Differentiate the market offering to create superior customer value Targeting Selecting the segment or segments to enter Positioning Position the market offering in the minds of the target customers Create value for target customers
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Definition of Key Concepts
Market Segmentation Dividing a market into smaller groups with distinct needs, characteristics, or behaviours who might require separate products or marketing mixes Market Targeting The process of evaluating each segment’s attractiveness and selecting one or more segments to enter Differentiation Actually differentiating the market offering to create superior customer value Positioning Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers
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Market Segmentation Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs 7-5
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Market Segmentation SEGMENTATION is grouping consumers with similar
needs Dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate product or marketing mixes If I talk about different segements of the car market luxury - show off/indulge sport - thrills family - space/safety economy - low fuel consumption outdoor - rugged I am segmenting needs
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What is the importance/benefits of Segmentation
Help identify opportunities while throwing out company weaknesses and strengths Matching what company does best with the most lucrative segments. Tailor the offering and position the brand Higher Perceived Quality/Value Greater Loyalty More Profit
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What is the importance/benefits of Segmentation
4. Helps us manage our portfolio 5. Identifies unmet needs (GAPS) which: > may provide entry to the market > may need to be covered to keep competition out 6. Focusing budgeting expenditures and business segments more precisely
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Bases of Segmenting Markets : Consumer Markets
Variables for Segmenting Consumer markets Geographic Demographic Psychographic Behavioural Geodemographics Segmentation occurs in 3 stages : An understanding of the needs of the various customers in the total market needs to be developed. Customers are grouped according to their needs and characteristics Groups are selected for targeting.
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Bases of Segmenting Markets : Consumer Markets
Geographic Segmentation is dividing a market into Different geographical units such as nations, states, regions, counties, cities or neighbourhood Variables Region : e.g. in bouillon market in broadly Nigeria Northern, South East and South West City Size : , 20,000-50,000 etc Density : Urban, suburban, rural Climate :Tropical, temperate, artic
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Bases of Segmenting Markets : Consumer Markets
Demographic Segmentation is dividing the market into groups based on demographic variables such as age, sex, family, size, family life cycle, income, occupation, education, religion, race and nationality Most popular bases for segmenting customer groups Age : Under 6, 6-11, 12-19, 20-34, 35-45, 46-54, 55-64, 65+ Gender : Male, Female Family Size : 1-2,3-4, 5+ Family Life Cycle: Income Occupation Education Religion Race Nationality
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Bases of Segmenting Markets : Psychographic
Psychographic Segmentation: dividing a market into different groups based on social class, lifestyle and personality characteristics Social Class : Upper Class, Middle class, Low class Lifestyle: Aspirers, Succeeders, Mainstreamers, reformers Personality : Compulsive, gregarious, authoritarian, ambitious
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Bases of Segmenting Markets : Behavioural
Behavioural Segmentation: dividing a market into groups based on the consumer knowledge, attitude, use or response to a product Purchase Occasion: Regular occasion, special occasion Benefits sought: Quality, service, economy User status: non-user, potential user, first time user, regular user Usage rate: Light user, medium user, heavy user Loyalty status: none, medium, strong, absolute Readiness status: unaware, aware, informed, interested, desirous, intending to buy Attitude towards product: Enthusiastic, positive, indifferent, negative, hostile
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Bases of Segmenting Markets : Multiple Segmentation
Multiple segmentation is used to identify smaller, better-defined target groups Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns
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Segmenting Business Markets
In addition to the same segmentation variables as consumers, business can also be segmented by: Customer-operating characteristics Purchasing approaches Situational factors Personal characteristics 7-21
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Bases of Segmenting Markets : Business Markets
Demographics Industry Company size Location Operating Technology User/non-user status Customer capabilities Personal Characteristics Buyer-seller similarity Attitudes towards risk Loyalty
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Bases of Segmenting Markets : Business Markets
Purchasing Approaches Purchasing function organizations Power structure Nature of existing relationships General purchase policies Purchase Criteria Situational Factors Urgency Specific application Size of the order
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Bases of Segmenting Markets : Business Markets
Segmenting international markets Geographic location Economic factors Political and legal factors Cultural factors 7-22
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Bases of Segmenting Markets : Business Markets
Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries 7-23
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Requirements for Effective Segmentation
To be useful, market segments must have the following characteristics: Homogeneous (similar) within- the customers in a market segment should be as similar as possible with respect to their responses to marketing mix variables and the segment variables/dimensions Heterogeneous (Differentiable ) refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programmes. Measurability/Operational: The degree to which variables such as the size, purchasing power, profile of segment and profits of the market can be measured and appropriate marketing mix developed to satisfy the market
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Requirements for Effective Segmentation
4. Substantial : The market segments are large or profitable enough to serve 5. Accessibility: Can the markets be effectively reached and served 6. Actionability: Effective programmes can be designed for attracting and serving segments
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Process for Segmenting Marketing
Name Broad Market List Customer Needs Narrow Product- Market Identify Determining Variables Name Possible Market Segments Evaluate Segments Estimate Size
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Market Targeting The process of evaluating each segment’s attractiveness and selecting one or more segments to enter
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Market Targeting : Evaluating Market Segments
Segment size and growth Segment structural attractiveness Company objectives and resources 7-28
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Market Targeting : Evaluating Market Segments
Segment size and growth Smaller versus larger segments Growth potential 7-28
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Market Targeting : Evaluating Market Segments
Segment structural attractiveness Competition Substitute products Power of buyers Power of suppliers NB: The above factors affect the profitability of the segment
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Market Targeting : Evaluating Market Segments
Company objectives and resources Competitive advantage Availability of resources Consistent with company objectives Firms should enter segments only where it has the capacity to offer superior value and gain advantages over competitors
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Market Targeting : Selecting Target Market Segments
Undifferentiated marketing Differentiated marketing Concentrated marketing Micromarketing A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
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Market Targeting : Selecting Target Market Segments
Undifferentiated marketing :targets the whole market with one offer Mass marketing Focuses on common needs rather than what’s different Mass Marketing is to produce something which almost everyone would want, then produce it in vast quantities at low prices and promote heavily to gain market share.
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Market Targeting : Selecting Target Market Segments
Differentiated marketing (multiple target market approach) : identifies and targets several different market segments and designs separate offers for each Goal is to achieve higher sales and stronger position Company able to direct resources more effectively. More expensive than undifferentiated marketing e.g. Procter & Gamble, Unilever
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Market Targeting : Selecting Target Market Segments
Concentrated marketing (single target market approach): targets a small share of a large market Limited company resources Knowledge of the market More effective and efficient e.g. Porsche Niche marketers focus on small sub-groups within the larger segments and produce very carefully-targeted products.
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Market Targeting : Selecting Target Market Segments
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations Local marketing Individual marketing e.g. Dell, Nike online business etc.
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Market Targeting : Selecting Target Market Segments
Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores 7-37
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Market Targeting : Selecting Target Market Segments
Local Marketing Benefits: Increased marketing effectiveness in competitive markets More customer-specific offerings Challenges: Increased manufacturing and marketing costs Less economy of scale Logistics Dilution of company image 7-38
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Market Targeting : Selecting Target Market Segments
Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers Also known as: One-to-one marketing Mass customization Markets-of-one marketing 7-40
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Market Targeting : Selecting Target Market Segments
Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs. Has made relationships with customers important in the new economy. Provides a way to distinguish the company against competitors 7-41
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Market Targeting : Choosing a Target Strategy
Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies 7-42
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Market Targeting : Socially Responsible Target Marketing
Benefits customers with specific needs Concern for vulnerable segments Children Alcohol Cigarettes 7-43
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Target Marketers: Combiners Vrs Segmenters
Combiners: try to increase the size of their the target markets by combining two or more segments. Combiners look at various submarkets for similarities rather than differences - Economies of scale - Less investment Segmenters: aim at one or more segments and try to develop different marketing mix for each segment - Adjust marketing mix to cater for each segment - Provide superior value - Better customer satisfaction - Higher Sales
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Discussion Questions Financial services providers are looking to segment their markets in the face of greater competition and ever more demanding customers. Would segmentation work for financial services? Show how financial services providers might go about segmenting their markets and implementing selected targeting strategies
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Differentiation & Positioning
Differentiation : how the marketing mix or offer is designed to be distinct from and better than what's available from a competitor. Positioning is the distinct, meaningful and valued place that the brand occupies or seeks to occupy in the minds of customers vis a vis competitors or other manufacturers. Positioning begins with differentiating a firm’s marketing offer, so that it will give consumer more value than competitors’ offers do.
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Differentiation & Positioning
Competitive Advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices
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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position Choosing the right competitive advantages Selecting an overall positioning strategy 7-46
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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Service differentiation Channels People Image 7-47
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Differentiation and Positioning
Choosing the Right Competitive Advantages A difference is worth establishing to the extent that it satisfies the following criteria: Important Distinctive Superior Communicable Preemptive Affordable 7-49
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Product Differentiation
Product anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas. i Optional features such as cars, furniture etc e.g. Volvo ii. Performance: Whirlpool designs its dishwasher to run more quietly iii. Style & Design e.g. Jaguar, Ikea furniture, Bose speakers iv. Innovation, consistency, durability, reliability and repairability : Give examples
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Services Differentiation
Service any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. Speedy, reliable and careful delivery e.g. Domino’s Pizza in 30 minutes Installation – IBM Customer Training – GE Consulting Services Speed of Service : Unique Trust, FEDEX NB: People are prepared to pay for premium service
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Personnel Differentiation
People The people employed in your organisation will determine the quality of service your customers receive. This is truer for services, but also impacts on businesses making tangible products. Companies can gain a strong competitive advantage through hiring and training better people than their competitors do
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Personnel Differentiation: Key Differentiating Traits
Positive Attitude : A crucial difference between excellence and mediocrity is a positive attitude Competence and Confidence : Confident people will always outperform those who are unsure of themselves. Knowledge is a source of confidence 3. Passion to listen, learn and grow to be the best 4. Integrity
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Image Differentiation
Even when competing offers look the same, buyers may perceive a difference based on company and brand images. Firms work to establish images that differentiate them from competitors A company or brand image should convey a singular and distinctive message that communicates the product’s main benefits and positioning Symbols can provide strong company or brand recognition and image differentiation e.g. Nike, Mercedes, Databank, Ferrari. The chosen symbols must be communicated through advertising the conveys the company or brand personality A company can also create an image through the types of event it sponsors Red Bull sponsors Formula 1 and
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Differentiation and Positioning : Selecting overall strategy
Value proposition is the full mix of benefits upon which a brand is positioned More for more More for the same Same for less Less for much less More for less 7-50
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Positioning : Value Positions
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Positioning : Value Positions
More for More : Involves providing the most upscale product or service and charging a higher price to cover the higher costs. E.g. Mercedes Benz i. Marketing offer high in quality ii Offers prestige to the buyer iii. It symbolizes status and a lofty lifestyle iv Often price difference exceeds the actual increment in quality NB: Can be very vulnerable . They often invite imitators who claim the same quality but a lower price. Luxury goods that sell well during good times may be at risk during economic downturns when buyers become more cautious in their spending
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Positioning : Value Positions
2. More for the same : Attack a competitor’s more for more positioning by introducing a brand offering comparable quality but at a lower price. E.g. Toyota introduced its Lexus line with a “more for the same” value proposition. Lexus Headline in the US : “Perhaps the first time in history that trading $72,000 car for $36,000 could be considered trading up” 3. The Same for less: Can be a powerful value proposition-everyone likes a good deal. E.g. Amazon.com sells the same book titles at lower prices that store competitors
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Positioning : Value Positions
4. Less for much less: It involves meeting consumers’ lower performance or quality requirements at a much lower price. A market almost always exists for products that offer less and therefore cost less. Not all people can afford the very best E.g. Motels, EasyJet, Rayanair
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Positioning : Value Positions
5. More for Less: Winning value proposition could be offering more for less. Many firms claim to do this E.g. Procter & Gamble claims that its laundry detergents provide best cleaning and everyday low prices. Long run not sustainable because offering more usually costs more NB: Each brand/firm must adopt a positioning strategy designed to serve the needs and wants of its target markets
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Positioning: Product Positioning
A product’s position is the way the product is defined by consumers on important attributes. The place the product occupies in consumers’ minds relative to competing products e.g. Key Soap A firm’s competitive advantage & its product’s position can be quite different A competitive advantage, like low costs or high quality, could influence a product’s position, but in many cases it is not central to it.
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Positioning: Product Positioning
Product positioning simplifies buying decision making Consumers position products with or without the help of marketers Marketers do not want to leave their products’ positions to chance They plan positions that will give their products the greatest advantage in selected target markets and they design marketing mixes to create these planned positions
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Positioning: Product Positioning Alternatives
Strengthen a brand’s current position in the mind of consumers e.g. Avis “We’re number two. We try harder” Search for a new unoccupied position in the mind of consumers e.g. P&P newspaper in Ghana and Sun in Nigeria To deposition or reposition the competition
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Positioning Strategies
Positioning Strategies use associations to change consumers’ perception of products Product attributes position many technical products e.g. cars, watches e.g. BMW “ The Ultimate driving machine” Benefits offered or the needs they fill position many products e.g. Crest reduces cavities and Macleans Sensitive relieves the pain of sensitive teeth. Usage Occasions position many products e.g. Mentadent Night Action toothpaste or internationally Kitkat means “Have a break”
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Positioning Strategies
4.Users help position products. Johnson & Johnson reposition baby shampoo towards a new user category of adults who wash their hair frequently and need a gentle shampoo 5. Activities after used to sell expensive products e.g. Rolex for sailing, 6. Personalities often help positioning. Prestigious brands are often positioned using successful personalities who can add to a products character e.g. Nike, Rolex 7. Origin positions product by association of place of manufacture e.g. shoes, champagne
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Positioning Strategies
8. Other brands can help position products E.g. with VW engineering and Skoda “more for less” positioning 9. Competitors provide two positioning alternatives i. Directly against a competitor e.g. Avis vrs Hetz ii. Away from competitors e.g. 7 Up positioned as “Uncola, the fresh and thirst quenching alternative to Coke and Pepsi 10. Product Class membership is another strategy. E.g “I can’t believe is not butter”
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Choosing and Implementing a position Strategy : Selecting the right competitive advantage
2 decision areas namely how many differences to promote e.g. only one benefit to the target market or more? Many argue company should aggressively promote only one benefit Unique Selling Proposition (USP) is the unique product benefit that a firm aggressively promotes in a consistent manner to its target market. The benefit usually reflects functional superiority e.g. best quality, best services, lowest price, most advanced technology Emotional Selling Proposition: Non functional attribute that has unique associations for consumers e.g. Rolex, Ferrari
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Choosing and Implementing a position Strategy : Pitfalls to avoid
Other Marketers advocate that firms position themselves or products on more than one attribute e.g. Volvo positions its automobiles as “safest” and “most durable” Pitfalls to avoid i. Underpositioning: an error referring to failure to position a brand or company ii Overpositioning: an error referring to too narrow a picture of the company, its product and brand being communicated to target customers. iii. Confused positioning: error that leaves consumers with confused image of the company its products or brand iv. Implausible Positioning: Making claims that stretch the perception of the buyers too far to be believed e.g. Launch of Lexus luxury car in US by Toyota company
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Choosing and Implementing a position Strategy : Selecting the right competitive advantage
Which differences to promote? . A difference is worth establishing if it satisfies the following criteria; Important : Difference delivers a highly valued benefit to target buyers Distinctive : Competitors do not offer the differences or the firm can offer it in a more distinctive way Superior : superior to other ways by which customers might obtain the same benefit Communicable: Can be communicated and visible to buyers Pre-emptive: Competitors cannot easily copy the difference Affordable : Buyers can afford to pay for the difference Profitable : The firm can introduce the difference profitably
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Communicating and Delivering the chosen position
Once a firm has chosen a position, it must take strong steps to deliver an communicate the desired position to target consumers. i. All the marketing mix effort must support positioning strategy E.g. “high quality position” means it must produce high quality product, charge a high price, distribute through high quality dealers, advertise in high quality media etc
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Developing a Positioning Statement
Positioning statement states the product’s membership in a category and then shows its point-of-difference from other members of the category. 7-51
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Differentiation and Positioning
Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions Price and orientation 7-45
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Differentiation and Positioning
A perceptual map for a shampoo market
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