CHAPTER 7

CHAPTER 7

MARKET SEGMENTATION, TARGETING, AND POSITIONING

FOR COMPETITIVE ADVANTAGE

CHAPTER OBJECTIVES

1. Define the three steps of target marketing: market segmentation, market targeting, and

market positioning.

2. List and discuss the major levels of market segmentation and bases for segmenting

consumer and business markets.

3. Explain how companies identify attractive market segments and choose a market-

coverage strategy.

4. Explain how companies can position their products for maximum competitive

advantage in the marketplace.

CHAPTER OVERVIEW

Sellers can take several approaches to a market. Mass marketing is one option. Under this approach the marketer makes a decision to mass-produce and mass-distribute one product and attempt to attract all kinds of buyers. Another option would be to simply vary the types of products produced. In the past, these methods were often pursued; however, with increasing fragmentation in the marketplace, target marketing now has become the option of choice by most firms. Under this third approach, the marketer’s decision is to identify the different groups that make up a market and to develop products and marketing mixes for selected target markets.

The chapter emphasizes the key steps in target marketing: market segmentation, market targeting, and market positioning. Market segmentation provides a method to divide or segment the market into narrow segments (using a variety of different meaningful variables) that can be better reached with the resources of the marketer. Market targeting examines each of the designated segment’s attractiveness and chooses one or more that match the marketing desires and objectives of the organization. The concept of market positioning arranges for a product to occupy a clear, distinctive, and desirable place relative to competition. The above three steps aid the marketer in effectively arranging their marketing mix(s) so that the likelihood of consumer response and competitive advantage is maximized by the organization.

CHAPTER OUTLINE

1. Introduction

a. Organizations that sell to consumer and business markets recognize that they

cannot appeal to all buyers in those markets, or at least not to all buyers in the

same way. Buyers are too numerous, too widely scattered, and too varied in

their needs and buying practices.

b. Today, most companies are moving away from mass marketing and toward

target marketing. This means they are:

1). Identifying market segments.

2). Selecting one or more of them.

3). Developing products and marketing mixes tailored to each.

c. Instead of scattering their marketing efforts (the “shotgun” approach), they can

focus on the buyers who have greater purchase interest (the “rifle” approach).

d. There are three major steps in target marketing.

1). The first step is market segmentation which is dividing a market into distinct

groups of buyers with different needs, characteristics, or behaviors who might

require separate products or marketing mixes.

2). The second step is market targeting which is evaluating each market segment’s

attractiveness and selecting one or more segments to enter.

3). The final step is market positioning which is formulating competitive

positioning for a product and creating a detailed marketing mix.

*****Use Key Terms market segmentation, market targeting, and marketing

positioning Here; Use Figure 7-1 Here; Use Chapter Objective #1 Here; Use

PowerPoint Slide #7-2 Here*****

2. Market Segmentation

a. Markets consist of buyers and buyers differ in one or more ways. They may differ

in their wants, resources, locations, buying attitudes, and buying practices.

Because buyers have unique needs and wants, each buyer is potentially a separate

market. However, treating each buyer as a separate market is usually not practical

or profitable. Therefore, the process of market segmentation is advised.

Levels of Market Segmentation

b. Because buyers have unique needs and wants, each buyer is potentially a

separate market. Since marketers cannot economically devise a separate for each

buyer (except under unusual circumstances), market segmentation in some form

is usually the practice implemented.

c. Three different levels of market segmentation are:

1). Mass marketing (no segmentation).

2). Complete segmentation (micromarketing).

3). Something in between (segment marketing or niche marketing).

*****Use Figure 7-2 Here; Use Discussing the Issues #1 Here; Use PowerPoint Slide

#7-3 Here*****

d. For most of this century, major consumer-products companies have held fast to

mass marketing. This meant the companies mass produced, mass distributed, and

mass promoted about the same product in about the same way to all consumers.

Henry Ford’s Model T epitomized this strategy.

1). The traditional argument for mass marketing is that it creates the largest

potential market, which leads to the lowest costs, which in turn can translate

into either lower prices or higher margins.

2). However, today, mass markets are slowly being splintered into a profusion of

smaller markets.

e. A company that practices segment marketing recognizes that buyers differ in their

needs, perceptions, and buying behaviors.

1). In this approach, the company tries to isolate broad segments that make up a

market and adapts its offers to more closely match the needs of one or more segments.

2). Segment marketing offers several benefits over mass marketing.

a). The company can market more efficiently, targeting its products or

services, channels, and communications programs toward only consumers

that it can serve best.

b). The company can market more effectively by fine-tuning its products,

prices, and programs to the needs of carefully defined segments.

c). The company may face fewer competitors if fewer competitors are focusing

on this market segment.

f. Niche marketing focuses on subgroups within segments. A niche is a more

narrowly defined group.

1). Niches are usually smaller and normally attract only one or a few competitors.

2). Small companies can focus their resources when they follow niche marketing.

3). In many markets today, niches are the norm.

g. Micromarketing is the practice of tailoring products and marketing programs to

suit the tastes of specific individuals and locations.

1). Local marketing involves tailoring brands and promotions to the needs and

wants of local customer groups (such as cities or neighborhoods). This

approach can drive up costs.

2). In the extreme, micromarketing becomes individual marketing. This process

tailors products and marketing programs to the needs and preferences of

individual customers.

a). Examples would include hotel stays, furniture, clothing, and bicycles.

b). Computer selection helps this process.

c). This trend mirrors the trend in consumer self-marketing where consumers

take more responsibility for determining which products and brands to buy.

*****Use Key Terms segment marketing, niche marketing, micromarketing, and

individual marketing Here; Use Discussing the Issues #2 Here; Use Marketing

Highlight 7-1 “Markets of One: Customizing the Marketing Offer” Here; Use

PowerPoint Slide #7-3 Here*****

Bases for Segmenting Consumer Markets

h. There is no best way to segment a market.

i. Market segmentation is the first step in target marketing. Since markets (as shown

above) of buyers differ in one or more ways, any of a variety of variables can be

used to segment a market.

j. Geographic segmentation calls for dividing the market into different geographical

units such as nations, states, regions, counties, cities, or neighborhoods.

1). Many marketers “regionalize” their programs.

2). It is common to localize products, advertising, promotions, and sales efforts to

fit the needs of geographical areas.

*****Use Key Term geographic segmentation Here; Use Table 7-1 Here; Use

PowerPoint Slide #7-4 Here*****

k. Demographic segmentation calls for dividing the market into groups based on

variables like age, sex, family size, family life cycle, income, occupation,

education, religion, race, and nationality.

1). Demographic factors are the most popular bases for segmenting customer

groups.

2). The popularity of the method is due to the observed relationship that consumer

needs, wants, and usage rates often vary closely with demographic variables.

3). Demographic variables are easier to measure than most other types of variables.

*****Use Key Term demographic segmentation Here; Use PowerPoint Slide #7-4

Here*****

l. Age and life cycle segmentation consists of dividing a market into different age and

life cycle groups.

1). Marketers must guard against stereotypes when using this form of

segmentation.

2). While certain age and life cycle groups do behave similarly, age is often a poor

predictor of a person’s life cycle, health, work or family status, needs, and

buying power.

*****Use Key Term age and life cycle segmentation Here; Use PowerPoint Slide #7-4

Here*****

m. Gender segmentation calls for dividing a market into different groups based on

sex.

1). This segmentation form has long been used for clothing, cosmetics, and

magazines.

2). New opportunities in this area are emerging such as automobiles and

deodorants.

*****Use Key Term gender segmentation Here; Use PowerPoint Slide #7-4

Here*****

n. Income segmentation consists of dividing a market into different income groups.

1). This form of segmentation has long been used by marketers for automobiles,

boats, clothing, cosmetics, financial services, and travel.

2). Using this form, marketers must remember that they do not always have to

target the affluent. Other income groups are also viable and profitable market

segments.

*****Use Key Term income segmentation Here*****

o. Psychographic segmentation calls for dividing a market into different groups based

on social class, lifestyle, or personality characteristics.

1). People in the same demographic class can exhibit very different psychographic

characteristics.

2). As previously seen in Chapter 5, social class can have a strong effect on prefer-

ences in a variety of product categories such as automobiles, clothes, home

furnishings, leisure activities, reading habits, and the choice of retailers.

3). As previously seen in Chapter 5, lifestyle also affects people’s interest in

various goods, and the goods they buy express those lifestyles. This method of

segmentation is gaining in popularity.

4). Personality variables can also be used to segment markets. Marketers will give

their products personalities that correspond to consumer personalities. Products

such as liquor, cosmetics, cigarettes, and insurance are cited as those that have

used personality segmentation.

*****Use Key Term psychographic segmentation Here; Use PowerPoint Slide #7-4

Here*****

p. Behavioral segmentation involves dividing a market into groups based on

consumer knowledge, attitude, use, or response to a product.

1). Many marketers believe that behavior variables are the best starting point for

building market segments.

2). Occasion segmentation consists of dividing the market into groups according

to occasions when buyers get the idea to buy, actually make their purchase, or

use the purchased item.

3). Benefit segmentation involves dividing the market into groups according to the

different benefits the consumers seek from the product.

a). Companies can use benefit segmentation to clarify the benefit segment to

which they are appealing, its characteristics, and the major competing

brands.

b). They can also search for new benefits and establish brands that deliver

them.

*****Use Key Terms behavior segmentation, occasion segmentation, and benefit

segmentation Here; Use Table 7-2 Here; Use Discussing the Issues #3

Here*****

4). User status can also be used to divide the market. Segments of nonusers,

ex-users, potential users, first-time users, and regular users of a product are

potential ways to segment.

5). Usage rates are another way that marketers segment markets. These

categories might be light, medium, and heavy user groups.

*****Use Figure 7-3 Here*****

6). Loyalty status can also be used to segment markets. Consumers can be loyal

to brands, stores, and companies.

a). Consumers can be completely loyal, somewhat loyal, or not loyal at all.

b). An amazing amount of information can be uncovered by studying loyalty

patterns.

q. Today there is a trend toward targeting multiple segments. Very often, companies

begin their marketing with one targeted segment, then expand into other segments.

This often boosts a company’s competitive advantage and knowledge of the

customer base.

1). One of the most promising developments in multivariable segmentation is

geodemographic segmentation. By using such services as PRIZM by

Claritas U.S. markets are classified into neighborhood clusters (types).

2). Geodemorgraphic segmentation provides a powerful tool for refining

demand estimates, selecting target markets, and shaping promotion messages.

*****Use Chapter Objective #2 Here; Use Marketing Highlight 7-2 “PageNet Leads

With Smart Segmentation” Here; Use PowerPoint Slide #7-5 Here*****

Segmenting Business Markets

r. Consumer and business marketers use many of the same variables to segment their

markets.

1). Business buyers can be segmented geographically or by benefits sought, user

status, usage rate, or loyalty status.

2). Additional variables unique to this market would be business customer demo-

graphics (industry, company size), operating characteristics, purchasing

approaches, situational factors, and personal characteristics.

3). An example of how buyers might be differentiated comes from a Signode

Corporation study where buyers were classified as being programmed buyers,

relationship buyers, transaction buyers, or bargain hunters.

4). By going after segments instead of the whole market, companies have a much

better chance to deliver value to consumers and to receive maximum rewards

for close attention to customer needs.

*****Use Chapter Objective #2 Here; Use Table 7-3 Here; Use PowerPoint Slide #7-6

Here*****

Segmenting International Markets

s. Companies can segment international markets using one or more of a combination

of variables. The chief factors that can be used are:

1). Geographic location.

2). Economic factors.

3). Political and legal factors.

4). Cultural factors.

t. Many companies use an approach called intermarket segmentation. In this

approach, companies form segments of consumers who are alike even though they

are located in different countries. This type of segmentation groups consumers

according to relevant needs and buying behavior, regardless of their countries and

cultures.

*****Use Key Term intermarket segmentation Here; Use PowerPoint #7-7

Here*****

Requirements for Effective Segmentation

u. There are many ways to segment, but not all segmentations are effective. To be

useful, market segments must have certain characteristics. Among the most

significant of these are that segments should be:

1). Measurable (the degree to which the size and purchasing power of a

market segment can be measured).

2). Accessible (refers to the degree to which a market segment can be reached

and served).

3). Substantial (refers to the degree to which a market segment is sufficiently

large or profitable).

4). Differentiable (refers to the segment being conceptually distinguishable and

being able to respond differently to different marketing-mix elements and

programs).

5). Actionability is the degree to which effective programs can be designed for

attracting and serving a given market segment.

*****Use Discussing the Issues #4 Here; Use PowerPoint Slide #7-8 Here*****

3. Market Targeting

a. The second step in target marketing calls for market targeting. The company now

has to evaluate the various segments and decide how many and which ones to

serve.

Evaluating Market Segments

b. In evaluating market segments, a marketer must look at three factors:

1). One factor is segment size and growth.

a). Companies must collect and analyze data on current dollar sales, projected

sales-growth rates, and expected profit margins for the various segments.

b). The company will be interested in segments that have the “right” size and

growth characteristics.

c). The largest, fastest-growing segments are not always the most attractive

ones for every company. The company must consider competition and

whether their company resources are sufficient to pursue the opportunity.

c. Another factor to examine is segment structural attractiveness. The company must

assess several major structural factors that affect long-run segment attractiveness.

Areas to consider include:

a). Current and potential competitors.

b). The threat of substitute products.

c). Relative power of buyers.

d). Relative power of suppliers.

d. Thirdly, the company needs to examine its own objectives and resources. The

opportunity should mesh with the company’s objectives and resources. The

environmental hazards of pursuing the opportunity must also be considered. “Can

the company succeed in gaining this segment?” is a question that must be

answered.

*****Use Marketing Highlight 7-3 “Socially Responsible Market Targeting”

Here; Use PowerPoint Slide #7-9 Here*****

Selecting Target Markets

e. After evaluating different segments, the company hopes to find one or more market

segments worth entering. It must engage in target-market selection.

1). Target market is defined as being a set of buyers who share common needs or

characteristics that the company decides to serve.

2). The firm can adopt one of three market-coverage strategies.

a). Undifferentiated marketing is a market-coverage strategy in which a firm

decides to ignore market segment differences and go after the whole mar-

ket with one offer (Hershey’s candy bars used this strategy with one candy

bar for everyone).

1]. Undifferentiated marketing relies on mass distribution and mass adver-

tising for its success.

2]. It aims to give the product a superior image in people’s minds.

3]. It provides cost economies.

4]. Modern marketers have strong doubts about this strategy.

*****Use Key Term undifferentiated marketing Here; Use Figure 7-4 Here; Use

Discussing the Issues #5 Here; Use PowerPoint Slide #7-10 Here*****

b). Differentiated marketing is a market-coverage strategy in which a firm

decides to target several market segments and designs a separate offer for

each.

1]. By offering product variations and marketing, the company hopes for

higher sales and a stronger position in a market segment.

2]. A growing number of firms have adopted differentiated marketing.

3]. Differentiated marketing typically creates more total sales than

undifferentiated marketing does.

4]. However, a company’s costs rise as it seeks to provide the different

variations and marketing.

5]. A marketer must weigh increased sales against increased costs when

deciding on a differentiated marketing strategy.

*****Use Key Term differentiated marketing Here; Use PowerPoint Slide #7-10

Here*****

c). Concentrated marketing is a market-coverage strategy in which a firm goes

after a large share of one or a few submarkets.

1]. Through concentrated marketing, a company achieves a strong market

position in the segments it serves because of its greater knowledge of

the segment’s needs and the special reputation it acquires.

2]. The company can also achieve many operating economies because of

the specialization.

3]. However, concentrated marketing involves higher risks. The particular

market can turn sour (“all your eggs in one basket”).

4]. Rapid advances in computer and communications technology are

allowing large mass marketers to act more like concentrated marketers.

Using detailed databases, these marketers segment their mass markets

into small groups of like-minded buyers.

*****Use Key Term concentrated marketing Here; Use PowerPoint Slide #7-10

Here*****

f. Many factors need to be considered when choosing a market-coverage strategy.

Among the more important considerations are:

1). Company resources--when a company’s resources are limited, concentrated

marketing makes the most sense.

2). Product variability--standardization can be matched with undifferentiated

strategies; variance can be matched with differentiated strategies.

3). Product’s stage in the life cycle--in the beginning stages use limited product

offerings and pursue undifferentiated or concentrated markets and

expand product offerings (differentiation) in the latter stages.

4). Market variability--if tastes are the same, use undifferentiated.

5). Competitor’s marketing strategies--be careful of using opposites unless you

can segment where they have not.

*****Use Chapter Objective #3 Here; Use Discussing the Issues #6 Here; Use

Applying the Concepts #1 Here; Use Company Case #7 Here; Use PowerPoint

Slide #7-11 Here*****

4. Positioning For Competitive Advantage

a. The final step in target marketing involves market positioning. Once the company

has decided on segments to enter, it must decide what “position” it wants to occupy

in those segments.

b. A product’s position is the way the product is defined by consumers on important

attributes--the place the product occupies in consumer’s minds relative to

competing products.

c. Because consumers cannot reevaluate products every time they make a buying

decision, they “position” products, services, and companies in their minds.

1). Consumers position products with or without the help of marketers.

2). Marketers do not want to leave their product’s positions to chance.

3). They plan positions that will give their products the greatest advantage in

selected target markets, and design marketing mixes to create those planned

positions.

*****Use Key Term product position Here; Use PowerPoint Slide #7-12 Here*****

Positioning Strategies

d. Marketers can follow several positioning strategies. They can position on:

1). Product attributes (BMW promotes performance).

2). Benefits (Crest reduces cavities).

3). Usage occasions (Gatorade in the summer--thirst; in the winter--fluid

replacement).

4). Users (Johnson and Johnson baby shampoo).

5). Against a competitor (VISA against American Express).

6). Away from competitors (7-Up away from the colas).

7). Product classes (margarine against butter).

8). Combinations.

*****Use PowerPoint Slides #7-13 and #7-14 Here*****

Choosing and Implementing a Positioning Strategy

e. The positioning task consists of three steps:

1). The first step is identifying possible competitive advantages.

a). The key to winning and keeping customers is to understand their needs and

buying processes better than competitors do and to deliver more value.

b). A competitive advantage is an advantage over competitors gained by

offering consumers greater value, either through lower prices or by

providing more benefits that justify competitive advantage.

c). Not every company will find many opportunities for differentiating its

product offering and gaining competitive advantage.

d). Most companies do not hope to gain a permanent advantage, only a

temporary one.

e). Specific ways that a company can differentiate its offer from those of

the competition are:

1]. Product differentiation involves differentiating a company’s physical

product. Methods include variety of standard or optional features,

performance, style and design, or attributes (such as consistency,

durability, reliability, or repairability).

2]. Services differentiation is the way the firm differentiates the services

that accompany the product. Methods include:

a]. Speedy, reliable, or careful delivery.

b]. Installation service.

c]. Customer training service.

3]. People differentiation involves hiring and training better people

than the competitors do.

4]. Image differentiation requires working to establish images that

differentiate them from competitors. Symbols, atmosphere, and events

are commonly used.

*****Use Key Term competitive advantage Here; Use PowerPoint Slide #7-15

Here*****

2). The second step is selecting the right competitive advantage. In so doing,

the organization must decide on the following:

a). How many differences to promote? Many marketers think that

companies should aggressively promote only one benefit to the target

market.

1]. Ad man Rosser Reeves called this benefit the Unique Selling

Proposition (USP).

2]. Go for the number one attribute.

b). Others believe that more than one differentiating factor is fine. However,

avoid:

1]. Underpositioning--failing to ever really position the company at all.

2]. Overpositioning--giving buyers too narrow a picture of the

company.

3]. Confused positioning--leaving buyers with a confused image of a

company.

c). Which differences to promote? Not all differences are meaningful or

worthwhile. A difference is worth establishing if it satisfies the following

criteria:

1]. Important.

2]. Distinctive.

3]. Superior.

4]. Communicable.

5]. Preemptive.

6]. Affordable.

7]. Profitable.

*****Use Discussing the Issues #7 Here; Use Marketing Highlight 7-4 “Schott:

Positioning for Success” Here; Use Table 7-4 Here; Use PowerPoint Slide #7-16

Here*****

3). The final step is communicating and delivering the chosen position. Once a

position is chosen, the company must take strong steps to deliver and

communicate the desired position to target consumers.

a). All the company’s marketing mix efforts must support the positioning

strategy.

b). Positioning calls for concrete action, not just talk.

c). Companies often find it easier to come up with a good positioning strategy

than to implement it.

d). The positioning strategy must be monitored and adapted over time to

match changes in consumer needs and competitor’s strategies.

e). Abrupt changes that might confuse consumers need to be avoided.

f). A product’s position should evolve gradually as it adapts to the ever-

changing environment.

*****Use Chapter Objective #4 Here; Use Company Case #7 Here; Use Applying the

Concepts #2 Here; Use Comprehensive Case II Here*****

DISCUSSING THE ISSUES

1. Describe how Ford Motor Company has moved from mass marketing to segment marketing. Do you think they will be able to move toward niche marketing or micromarketing? If so, how? How is the company using the World Wide Web to change its marketing segmentation approach?

Ford Motor Company is a good example of a company that has evolved from a mass-marketer to a market-targeter. Ford originally made one car for the entire market--customers didn’t even have a choice of colors. Over time, Ford added other cars to its line, and eventually developed cars for nearly every market segment (target marketing).

Though mass produced cars are still the norm in the market (such as Ford’s Taurus--one of the top selling cars in the U.S. market), niche marketing (such as four wheel drive and sport utility vehicles) are gaining in popularity and profitability. Some companies are pursuing micromarketing. For example, Plymouth’ Prowler (a purple “street rod”) only produced 3000 cars in the initial offering. The new Copperhead (another stylish hot car) is even more specialized.

Students should be asked to investigate Ford’s Internet page and determine how the company’s marketing effort has changed. The Internet address is www.ford.com. The students will observe a variety of promotional and direct contact possibilities within the structure of the site. Ask students about the profile of the typical visitor of this site. How could it be determined?

2. Several years ago Samuel Adams Brewery led a charge of “micro-breweries” in an attack on the established brewers domestic beers. What is micromarketing and how might it have been used by these “micro-breweries?” Evaluate the strategy.

The beer market is segmented in many ways: by region (through regional brewers and brands), income and social class (premium beers and imports versus budget beers), life style (“The original party animal”), race (especially beer versus malt liquor, which is more popular with black consumers than white), purchase occasion (“Here’s to good friends”), and usage rate (“The one beer to have when you’re having more than one”). Benefit segments are also served; Miller Lite beer is a good example using its famous “Great taste” and “Less filling” ads for separate segments.

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing (tailoring brands and promotions to the needs and wants of local customer groups--cities, neighborhoods, and even specific stores) and individual marketing (tailoring products and marketing programs to the needs and preferences of individual customers).

Students should research the “microbrewers.” When they do so they will find differences in distribution, promotion, and policy strategies used by these firms.

3. Table 7-2 demonstrates the usefulness of benefit segmentation (as applied to the toothpaste market). Pick another product or service category of your choice and construct a simple table (use Table 7-2 as a model) that demonstrates the benefit segmentation approach. Be sure to explain how and why you created the categories that you did.

Students are free to pick any example they choose. If they do not have any ideas or the instructor would like to provide structure, try using the following: trucks, computers, beer, or soft drinks.

As a further demonstration of the material in Table 7-2, the instructor can use the following example to generate discussion. The material below is not meant to be all inclusive. Instead, it is meant to be a discussion motivator.

Benefit Segmentation of the Deodorant Market

Benefit Segments Demographics Behavior Psychographics Brands

Economy Men, coupon Moderate Prefer economy Brands

(low price) buyers users value oriented on sale

Sports Men Heavy users High activity Mitchum

(heavy sweat)

Odor prevention Men, teenagers, Heavy users High social Right Guard

medical condition activity

Feminine Women Light users Feel, and Secret

fashion sense

4. There are many ways to segment a market. However, not all segmentations are effective. Using the five segmentation variables (as mentioned in the text) that demonstrate segmentation usefulness or effectiveness, determine the attractiveness of (a) Internet users, (b) pager owners, and (c) the adult student that returns to college to get an undergraduate degree. Explain how you determined the attractiveness of each potential market.

The text indicates that to be useful market segments must be: measurable, accessible, substantial, differentiable, and actionable. Students should evaluate each of the examples using the above criteria.

Example (a): Internet users. This segment can be approached from a variety of directions. It is somewhat difficult to measure how many there actually are, however, there are many estimates floating around. Data from the Internet itself might be the most useful in determining the number (approximations). The number of subscribers to American Online might be a useful starting place. The users are accessible through e-mail. The number would have to be classed as substantial. The ability to differentiate between them is more difficult. Many marketing companies do believe that these consumers will take action. Therefore, there should be an increase in advertising on the Internet directed toward this segment.

Example (b): Pager owners. This segment is somewhat similar to the Internet users in that measurement would be general in nature and could be approximated from secondary sources (such as from pager companies or telephone companies). Exact measurement would be difficult. The accessibility of these consumers would be difficult except through their service providers (either directly or through monthly statements). However, promotions (such as magazine or outdoor advertisements) can be constructed. The number is thought be substantial, however, this segment would have to be tied to similar devices for purchase conclusions to be useful. For example, a pager owner might be a prime candidate for a computer, a user of the Internet, or software. The segment would not be useful for a cereal manufacturer. Differences could be shown through usage (personal or business) or distances desired (local or state).

Example (c): Adult students that returns to a college to get an undergraduate degree. This example is designed to encourage the student to explore this segment at their own college or university. After their exploration, results should be shared with the class. What determined if the segment was viable or not?

5. Ignoring the examples used by your text, find an example of each of the three market-coverage strategies described in the chapter. Be sure to explain how and why you think your examples fit the categories. If you were a marketing manager, of what value would it be to know which of the market-coverage strategies your competitors were using?

The three market coverage strategies described in the text are undifferentiated marketing, differentiated marketing, and concentrated marketing. This question is designed to get the student to apply information provided by the text. Students should be encouraged to examine contemporary business magazines for illustrations of each of the three groups.

An additional example to use for the undifferentiated marketing strategy might be Morton’s Salt. Examples in this category are difficult to find because few firms use this strategy alone. The best that students will probably find is something close--like Morton’s Salt (even it does not exactly fit---just like Hershey’s Candy no longer fits).

Examples of companies that follow the differentiated marketing strategy abound. Most students can refer to athletic shoe companies, jeans companies, computer companies, or automobile companies. Be sure to ask them how they differentiate their products. It might also be a useful exercise to have the students go to their selected companies’ Web sites and explore the differentiation that might be present on these sites.

Examples of companies that follow the concentrated marketing strategy are also common. Most students can refer to fast-food businesses, certain breweries, wine producers, and cosmetic companies. Be sure to ask students how they can determine whether a company is using the concentrated versus the differentiated approach. Ask students to bring advertisements to class that would demonstrate these directions and differences.

6. Once a company has decided which segments of the market it will enter, it must decide what “positions” it wants to occupy in those segments. Using the automotive industry (you may also use cars, trucks, or sport utility vehicles as your categories) as an example, collect advertisements that demonstrate positioning. Using your advertisements as your example of positioning, create three tiers of competitors (luxury, mid-size, and economy). Be sure to provide at least three examples of each competitive tier. Do your illustrations (based on your appraisal of your collected ads) match your perceptions of where these automakers belong? What unique strategies do each seem to be using?

This question is designed to promote investigation and action on the part of the students. The instructor can assign this question as a group project, for extra credit, for demonstration by a few students, or to the entire class. The purpose of the learning exercise is several fold. First, the students must understand the concept of positioning as presented in the text. Second, they must be able to create categories to demonstrate “positions.” The automotive industry was selected because of the obvious positions and the ease of obtaining advertisements. The students can be queried as to the form of differences that occur within the chosen categories. These can be matched to those mentioned in the text. Third, students must match perceptions against actual illustrations. Lastly, the students should be able to determine specific strategies (such as low price, differentiated features, number of models, et cetera) by observing their chosen advertisements.

7. Using the information collected in #6 match the competitive differences displayed in the advertisements against the criteria suggested by the text. Which of your chosen examples provide the best illustrations of establishing competitive difference? What have you learned from this comparison process that might make you a more effective competitor?

As noted in the text, consumers typically choose products and services that give them the greatest value. Thus, the key to winning and keeping customers is to understand their needs and buying processes better than competitors do and to deliver more value. Competitive differences may come in the form of product differentiation (through consistency, durability, reliability, or repairability), services differentiation (through delivery, installation, repair, customer training, or consultation services), people differentiation, and image differentiation.

Students should be able to match the advertisements (and the positions contained therein) to competitive differences (as indicated above). This process provides valuable training in being able to compare and analyze competitive differentiation and strategy. Students should be able to explain how they have learned from the process.

APPLYING THE CONCEPTS

1. Intense competition is the rule in the fast-paced and ever-changing Internet server business. By looking at the advertisements, practices, and strategies, determine how Microsoft, Netscape, and others are attempting to position themselves.

· What market segments seem to be the most important targets?

· What legal maneuvers are being tried?

· What product differences are present between the major players? Are these really significant differences are only imagined ones?

· Who seems to be winning? Why?

2. It is possible to position people, places, and ideas just as effectively as products and services. Explain how each of the following have attempted to position themselves and relate the strategies that you think have been used (be sure to critique the effectiveness of each):

· Your university or college.

· A political candidate of your choice.

· An entertainment facility (such as a theme park).

· A local shopping mall (or large retail store).

· The right-to-life movement.

· MADD (Mothers Against Drunk Driving).

Comments on Applying the Concepts for Chapter 7

1. This question requires the students to do some investigation of Internet server business. Internet searches will reveal the major players and the on-going legal battles between Microsoft, the Federal government, and Microsoft’s competitors.

The market segments fall into several categories: the home computer consumer, the business consumer, the educational consumer, the government consumer, and the batch distributor (such as for mass mailings).

Problems have arisen (in a legal sense) because of Microsoft’s attempts to link their most modern software to using their Web browser. Competitors and the Federal government are claiming foul. Any contemporary business publication (such as Business Week or Fortune) can keep the student up-to-date on the latest legal maneuvers.

At present, the differences between the products seem to be more perceptual than significant. However, these perceptions and loyalties are strong.

As to who is winning, the score is uncertain. Microsoft seems to be gaining in popularity (though the cases in court could alter the outcome) over rivals.

2. Students should provide specific examples of positioning for each of the required areas. The student will note that most of the choices have a personal (if not perceptual) aspect to them. Students should be asked to demonstrate the primary positioning themes of each of the requested items (such as public statements, advertisements, company literature, or written stories or critiques). Each student should attempt to separate the true position of the entity from their own perception of the entity.

COMPANY CASE COMMENTS

Use Company Case 7: PowerAde and All Sport: Muscling in on the Sports Drink Market with Chapter 7. See Company Case Comments section at the end of the Instructor’s Manual. This case is best used following the section on choosing a market-coverage strategy or communicating and delivering the chosen position in the latter portions of the chapter. It is at this point that Comprehensive Case II: Enterprise Rent-A-Car: Selling the Dream may also be used. This case summarizes material in the second section of the text. See Company Case Comments section at the end of the Instructor’s Manual.