1. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 1 STP Marketing 1) Segment - identify variables, develop profiles 2) Target - evaluate attractiveness of each segment, select targets 3) Position - select how want consumers to perceive product

2. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 2 Reasons for Segmenting and Targeting Segmenting is grouping customers or prospects according to common characteristics, needs, wants, and/or desires. Targeting is analyzing, evaluating, and prioritizing those market segments deemed most profitable to pursue.

3. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 3 Effective Segmentation: 1) Measurability - can you measure segment? 2) Accessibility - can segment be reached? 3) Profitability - what’s the segment’s potential? See Table 7-8, page 263!

4. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 4 Types of Market Segmentation Behavioral segments Demographic segments Ethnic segments Geodemographic segments Psychographic segments Lifestyle segments Life stage segments Relationship Segments Adopter Segments

5. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 5 Types of Segmentation Geographic Regions Population size Climate Retail trading area

6. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 6 Types of Segmentation Demographic Age – Boomers vs. Gen X vs. Gen Y Gender – males vs. females vs. ????? Family size/life cycle Income Occupation Education Race http://advertising.utexas.edu/world/index.asp Geodemographics -- PRIZM http://www.claritasexpress.com http://cluster2.claritas.com/Express/Default.wjsp?ID=60

7. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 7 Demographic Trends 1) Changing families later marriage fewer kids higher divorce working spouses aging parents – “SANDWICH GENERATION” 2) Nonfamily households 3) Geographic shifts 4) Higher education 5) Ethnic population

8. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 8 Emerging Markets People of Color Buying power has doubled in last decade Nearly 1 in 3 claims ethnic identity Companies struggling to understand and develop multiethnic awareness and advertising know-how Toyota fiasco with RAV4!

9. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 9 African Americans – demos 13% of total population Growth rate slowing Spending power: $572 billion Geo location: TX, D.C., NY, MI, IL, PA, CA, GA, CT, IN Preferred media: TV, Mag, radio Lifestyle/values: distrust corporations, value self image, family/home, religion is cornerstone of lifestyle

10. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 10 Latinos – demos 12.5% of total population Fastest growth rate – just passed African Americans Spending power: $452 billion Geo location: TX, FL, NY, NJ, IL, CA, Preferred media: Spanish radio, billboards, print ads Lifestyle/values: family and religion, value personal interactions, work hard for financial security, sports and family activities, many speak Spanish at home

11. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 11 Asian Americans 3% of total population Highest median hh income Spending power: $253 billion Geo location: CA, TX, NY, HI Preferred media: Print, TV (English or native) Lifestyle/values: value family, tradition, authority, save money, loyal to companies who value them, price sensitive.

12. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 12 Women 52% of total population Purchase 80% of retail goods Buy 65% cars Own more than half of all stocks Represent half of those online Preferred media: Magazine, radio, time permitting!

13. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13 Gay and Lesbian Markets 16 million estimated (accuracy issues) Spending power: $445 billion Geo location: Major urban areas with growth in smaller towns GM: San francisco, Atlanta, Austin, Seattle LF: Albuquerque, Iowa City, Santa Fe Lifestyle/values: Trendsetters, more discretionary income, travel.

14. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 14 Types of Segmentation Psychographic: VALS Personality “GeoVALS” http://www.sric-bi.com/VALS/geovals.shtml

15. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 15 VALS 2 Typology Exhibit 5-4 See Page 155 Slide 26 Abundant resources Minimal resources Actualizers FulfilledAchieversExperiencers Believers Strivers Makers Strugglers Principle oriented Status oriented Action oriented

16. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 16 Types of Segmentation Behavioristic How segments use product: Purchase Occasion Usage rate Benefits sought Relationship segmentation Degree of Loyalty: None  Brand Advocate See Table 7-4!

17. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 17 Descriptive Model of Segmenting and Targeting Figure 7-6, p.258

18. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 18 How Targeting Works Targeting is done by using profile characteristics of segments to draw boundaries around a particular group of customer or prospects that are projected to respond well to a brand and its marketing communication. Then, marketers estimate the group’s size. The next step is to prioritize the segments. A company then develops message strategies and media plans for select segments.

19. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 19 Finally, Positioning! It’s not what you do to the product, but what you do to the mind! How do you want consumer to perceive your product? i.e. It’s not delivery, its Dijorno…. Get the feeling….. Remember….its all PERCEPTIONS!

20. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 20 Positioning Strategy 1. Who’s the target market? Research! 2. Choice criteria – what product attributes are important to target? 3. Identify competitors – strengths vs. weaknesses 4. Determine competitors’ position – based on attributes Perceptual map 5. Determine unique offering How is our brand different from competition? 6. Select a position -- Must consider laws of positioning

21. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 21 Positioning Laws 1. Law of leadership It’s better to be first than it is to be better 2. Law of category If you can’t be first, set up a new category. People are interested in what’s new, not what’s better. 3. Law of the mind It’s better to be first in mind than first in marketplace. Modified law of leadership – have an easy name! 4. Law of perception Marketing is not a battle of products, it’s a battle of perceptions.

22. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 22 Positioning laws 5. Law of focus The most powerful concept in marketing is owning a word in the prospects mind. Must be simple and benefit oriented. 6. Law of exclusivity Two companies cannot own the same word in a prospect’s mind. Burger king cannot own “fastfood” 7. Law of the ladder The strategy to use depends on which rung you occupy on the ladder. Avis, we try harder.

23. Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 23 Laws cont’d 8. Law of Duality – In the long run, it’s a 2 horse race. Coke vs. pepsi Listerine vs. scope 9. Law of the opposite Determine second place based directly on leader Burger King – broiled, not fried. 10. Law of division – a category will ultimately divide Vans vs. minivans vs. SUV vs. stationwagons