Marketing Combined PDF
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2023
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This document is a chapter on marketing environment analysis. It covers micro and macro environmental factors influencing marketing strategy, including company capabilities, competition, corporate partners, and social, technological, economic, political, and legal trends. The chapter also includes examples of real-world case studies.
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Chapter 3 Analyzing the Marketing Environment © 2023 McGraw Hill Limited 3-1 Chapter 3: Analyzing the Marketing Environment LEARNING OBJECTIVES LO1 Outline how the factors in a firm’s microenvironment influence it...
Chapter 3 Analyzing the Marketing Environment © 2023 McGraw Hill Limited 3-1 Chapter 3: Analyzing the Marketing Environment LEARNING OBJECTIVES LO1 Outline how the factors in a firm’s microenvironment influence its marketing strategy LO2 Identify the factors in a firm’s macroenvironment and explain how they influence the overall marketing strategy LO3 Identify important social and natural trends that impact marketing decisions © 2023 McGraw Hill Limited 3-2 Analyzing the marketing environment! l Important to continuously monitor both internal & external environments l Technology influences consumers buying behaviours and demands l Businesses need to rethink how they offer products & services to consumers l Need to keep an eye on additional long-term opportunities © 2023 McGraw Hill Limited 3-3 A marketing environment analysis framework © 2023 McGraw Hill Limited 3-4 Microenvironmental factors © 2023 McGraw Hill Limited 3-5 Company capabilities Core competency = Satisfy customer needs Knowledge, facilities, patents, technology, people etc. applied to Target markets, products etc. © 2023 McGraw Hill Limited 3-6 Competition Identify and analyze direct and indirect competitors Know strengths & weaknesses Competitive Intelligence (CI) used to collect and synthesize info Bulldog Skincare’s focus on sustainability is evident with products such as its Bamboo Razor. © 2023 McGraw Hill Limited 3-7 Bulldog - Taking a bite out of the competition! Bulldog founders identified a niche in the male grooming product market Created a high-quality, natural skincare product By 2010 were inning awards for Best Men’s Face Cream Today, their product line includes face wash and moisturizers, shower gels and body lotions, as well as razors, beard-care creams, and oils Bulldog Skincare’s focus on sustainability is evident with products such as its Bamboo Razor. © 2023 McGraw Hill Limited 3-8 Corporate Partners Firms are part of alliances – few work in isolation Align with suppliers, corporate partners etc. Nau works with its corporate partners to develop socially responsible outdoor (left) and urban (right) apparel. © 2023 McGraw Hill Limited 3-9 Test Your Knowledge Which of the following is NOT considered part of a company’s immediate environment? A) company’s corporate partners B) company’s stockholders C) competition D) company’s capabilities © 2023 McGraw Hill Limited 3-10 Macroenvironmental factors Acronym: CDSTEP © 2023 McGraw Hill Limited 3-11 Culture Culture Country Culture vs. Regional Subcultures Some firms, like Coca-Cola, bridge the cultural gap by using very similar advertising in different countries, as illustrated by these two ads using the same model and tagline. The left photo is for the English-speaking market; the right photo is for the Spanish-speaking market. © 2023 McGraw Hill Limited 3-12 Demographics Characteristics of human populations & segments used to identify consumer markets. © 2023 McGraw Hill Limited 3-13 Test Your Knowledge Which of the following are examples of typical demographics? A) age, gender, race B) behavior, dress, physical settings C) temperature, topology, climate D) conservative, liberal, independent © 2023 McGraw Hill Limited 3-14 Generational cohorts Generation Z (aka Digital Natives) Baby Boomers Generation X Generation Y Seniors (aka Millennials) Marketers position their products and services differently depending on which generational cohort they are targeting. A group of people of the same generation. © 2023 McGraw Hill Limited 3-15 Generational Cohorts classifications staring in 1946 Generation Z Generation Y Generation X Baby Boomers Generational Cohort Range of birth years Born after 1993 1981 to 1992 1965 to 1980 1946 to 1964 © 2023 McGraw Hill Limited 3-16 Income l Purchasing power is tied to income l Statistics Canada tracks income l Many middle-class families feel the decline in purchasing power in recent years l The top 10 percent of Canadians have family income in excess of $226,000. © 2023 McGraw Hill Limited 3-17 Income l Canadians are classified in three distinct groups based on income and other factors such as background, education, and occupation l Upper class l Middle class l Lower class © 2023 McGraw Hill Limited 3-18 Education Education is related to income, which determines spending power © 2023 McGraw Hill Limited 3-19 Gender Male/female roles have been shifting Marketing has changed to reflect these shifts To encourage female gamers, in Bandai Namco Entertainment’s recent “Bonnie- and-Clyde” tournament, teams composed of one male and one female player battled one another for prize money. © 2023 McGraw Hill Limited 3-20 Ethnicity Ethnic composition of Canada is changing 1/5 Canadians not born in Canada Immigration has been responsible for over 75 percent of Canada’s total population growth since 2016 By 2030, population growth will be mainly attributed to immigration (left) Sephora used an all-Indigenous cast and crew to celebrate National Indigenous History Month. (right) Harley-Davidson created the Tough Turban, protective headgear for Sikh riders. © 2023 McGraw Hill Limited 3-21 Test Your Knowledge This group of Canadians can afford a good life most of the time. They tend to be careful about their spending and are often value conscious. They are known as the ______-class. A) middle B) upper C) working D) lower © 2023 McGraw Hill Limited 3-22 Technological advances Technology has impacted every aspect of marketing: l New products l New forms of communication l New retail channels Netflix relies on its advanced technological capabilities not just to suggest which movies we should watch but also to develop new content that it is confident we will like. © 2023 McGraw Hill Limited 3-23 Artificial Intelligence Artificial Intelligence (AI) solutions, which rely on computer systems to perform tasks that require human intelligence, such as speech recognition, decision making, or translations. © 2023 McGraw Hill Limited 3-24 Artificial Intelligence Marketers that are embracing (AI) primarily use it for: l Advanced customer segmentation l Media selection and buying The North Face uses AI, with its Expert Personal Shopper program, to determine what customers are looking for. By asking questions, the program selects items l Customer engagement that might meet a shopper’s needs and presents them onscreen. © 2023 McGraw Hill Limited 3-25 Robotics Robotics applications typically perform work that previously was the responsibility of human workers. Retailers are experimenting with delivering products using drones. © 2023 McGraw Hill Limited 3-26 Internet of things Internet of Things (IoT) emerges when multiple “smart devices” with Internet-connected sensors, such as refrigerators, dishwashers, and coffee machines, combine the data they have collected to help both consumers and companies consume more efficiently. © 2023 McGraw Hill Limited 3-27 Economic situation Foreign currency fluctuations Combined with inflation and interest rates affect a firm’s ability to market goods and services Tourists from other countries often come to Canada to shop because the value of the dollar is low compared with their own currency. © 2023 McGraw Hill Limited 3-28 Political/legal environment l Competition Act l Consumer Packaging and Labelling Act l Food and Drugs Act l Access to Information Act l Patent Act l North American Free Trade Agreement (NAFTA) © 2023 McGraw Hill Limited 3-29 Test Your Knowledge Firms like iRobot have a long history of developing robotic machines that help consumers undertake daily chores in the house, such as vacuuming. But other home appliances are joining and extending this trend, producing the new notion of the _______. A) internet of things B) robotics C) artificial intelligence D) superficial intellect © 2023 McGraw Hill Limited 3-30 Social and natural trends l Shape consumer values l 17 Global Goals of Sustainable Development United Nations, “Sustainable Development Goals: 17 Goals to Transform Our World,” Last modified March 18, 2019. The content of this publication has not been approved by the United Nations and does not reflect the views of the United Nations or its officials or Member States. © 2023 McGraw Hill Limited 3-31 Greener Consumers Green marketing involves a strategic effort by firms to supply customers with environmentally friendly merchandise. Demand for green-oriented products is a boon to firms like Natasha Tonić’s line of swimwear made from hemp. © 2023 McGraw Hill Limited 3-32 Privacy concerns l Loss of privacy l Identity theft l Do not call l Do not e-mail © 2023 McGraw Hill Limited 3-33 Time-poor society In the majority of families, most parents work Consumers have many more choices regarding leisure time Many consumers multitask Time-poor consumers multitask to cope with their lack of leisure time. © 2023 McGraw Hill Limited 3-34 Efficient Distribution of Food l Food has always defined social trends that are central to people’s lives and environments. l Trends associated with food and eating establish markets for diet-related products. l Issues with food waste, making up 28 percent of the garbage in municipal landfill sites, with Canada ranked third for being the worst food waste offender in the world. l One reason for the waste is simply because we produce more food than is needed. © 2023 McGraw Hill Limited 3-35 Health and Wellness Concerns l In Canada, 63.5 percent of adults are categorized as obese or overweight. l In the past 20 years, child obesity has doubled, and teenage obesity tripled in North America l (CSPI) has proposed Guidelines for Responsible Food Marketing to Children, which outlines a variety of changes to advertising directed at children. © 2023 McGraw Hill Limited 3-36 Health and Wellness Concerns Health and wellness concerns have also spurred a number of mobile apps, many of which help customers get or stay in shape by tracking exercise, calorie intake, and sleep cycles. The practice of yoga is growing as more consumers embrace healthy lifestyles. © 2023 McGraw Hill Limited 3-37 Chapter 4 Consumer Behaviour © 2023 McGraw Hill Limited 4-1 Chapter 4: Consumer Behaviour LEARNING OBJECTIVES LO1 Describe the steps in the consumer buying decision process LO2 Identify what determines how much time consumers will spend searching for information before buying a product or service LO3 Summarize how psychological, social, and situational factors influence consumers’ buying behaviour LO4 Explain how involvement influences the consumer buying decision process © 2023 McGraw Hill Limited 4-2 Consumer Behaviour l Consumer should drive marketing strategies (needs) l Firms must understand consumer’s needs l Founding principle: listen & learn from your customers l Feedback = improve © 2023 McGraw Hill Limited 4-3 The Consumer Decision Process © 2023 McGraw Hill Limited 4-4 Step 1: Need Recognition Need Recognition Functional needs Psychological needs Does a Dior Minaudière clutch, like this one, satisfy psychological or functional needs? © 2023 McGraw Hill Limited 4-5 Step 2: Information Search Information Search Internal Search for Information External Search for Information Lauren liked the picture of Zendaya wearing a ruffled turtleneck in a magazine so much that she searched online to find and purchase it. © 2023 McGraw Hill Limited 4-6 Factors affecting consumers’ search processes Perceived Benefit vs. Perceived Costs Factors Affecting Consumer’s Search Processes Actual or Locus of Perceived Control Risk © 2023 McGraw Hill Limited 4-7 Factors affecting consumers’ search processes Is it worth the time and effort to search for information about a product of service? © 2023 McGraw Hill Limited 4-8 Factors affecting consumers’ search processes Internal Locus of Control: some control over outcomes = engage in more search activities External Locus of Control: Fate, external factors control all outcomes = why bother? © 2023 McGraw Hill Limited 4-9 Factors affecting consumers’ search processes Performance risk Actual versus Perceived Risk Financial risk Social risk Physiological risk Psychological risk © 2023 McGraw Hill Limited 4-10 Test Your Knowledge Which of the following is NOT one of the factors affecting consumers’ search processes? A) the perceived benefits versus perceived costs of search. B) the locus of control C) the actual or perceived risk D) the kind of search © 2023 McGraw Hill Limited 4-11 Step 3: Alternative Evaluation Evaluative Criteria Alternative Evaluation Determinant Attributes Macy’s is part of the retrieval set of stores available to women for business apparel, but Banana Republic is in the evoked set for young women looking for business apparel. © 2023 McGraw Hill Limited 4-12 Alternative Evaluation: Compensatory & Non- compensatory Overall Mileage Style Price Accessories Score Importance 0.4 0.1 0.3 0.2 Weight Toyota 10 8 6 8 8.2 Honda 8 9 8 3 7.1 Nissan 6 8 10 5 7.2 Evaluations are based on a 1 (very poor) to 10 (very good) scale. Based on the non-compensatory decision rule (based on price), Nissan is the best candidate for purchase. © 2023 McGraw Hill Limited 4-13 Alternative Evaluation: Decision Rules Compensatory Consumer Decision Rules Decision Heuristics Noncompensatory © 2023 McGraw Hill Limited 4-14 Alternative Evaluation: Decision Rules Examples of decision heuristics: Price Brand Product presentation The distinctive style of these lululemon yoga pants is a determinant attribute that distinguishes the product from other brands. © 2023 McGraw Hill Limited 4-15 Test Your Knowledge Decision heuristics are ________ that help a consumer narrow down his or her choices. A) mental shortcuts B) breathing exercises C) logical steps D) compensatory decision rules © 2023 McGraw Hill Limited 4-16 Step 4: Purchase Decision Purchase Decision Customers are ready to buy © 2023 McGraw Hill Limited 4-17 Purchase & Consumption Increase Conversion rate Reduce real or Merchandise in Reduce the virtual stock actual wait time abandoned carts Make it easy Plenty on hand Open more check-outs © 2023 McGraw Hill Limited 4-18 Step 5: Postpurchase Postpurchase Three potential outcomes Consumers often feel dissonance when purchasing products or services. © 2023 McGraw Hill Limited 4-19 Postpurchase outcomes © 2023 McGraw Hill Limited 4-20 Test Your Knowledge Which of the following is NOT a step to use to ensure postpurchase satisfaction? A) Providing money-back guarantees and warranties. B) Build unrealistic expectations. C) Encourage customer feedback. D) Demonstrate correct product use. © 2023 McGraw Hill Limited 4-21 Customer Loyalty Customer loyalty develops over time with multiple repeat purchases of the product or brand from the same marketer. Loyal customers will buy only certain brands and shop at certain stores, and they do not consider other brands or firms in their decision. © 2023 McGraw Hill Limited 4-22 Undesirable Consumer Behaviour Negative word-of-mouth & rumours can be very damaging The Internet is an effective way to spread negativity Marketers must respond quickly! © 2023 McGraw Hill Limited 4-23 Factors Influencing Consumer Buying Decisions © 2023 McGraw Hill Limited 4-24 Physiological Needs In this ad, Subway satisfies the physiological need for food while letting the consumer know that healthy eating can also be delicious. © 2023 McGraw Hill Limited 4-25 Psychological Factors: Motives © 2023 McGraw Hill Limited 4-26 Psychological Factors: Attitude Your evaluation or feeling towards an object or idea Learned & long-lasting but they can change abruptly Affective vs. behavioural components Yoga satisfies self-esteem needs by helping people satisfy their inner desires. © 2023 McGraw Hill Limited 4-27 Psychological Factors: Perception Culture, tradition, and our overall upbringing determine our perceptual view of the world. © 2023 McGraw Hill Limited 4-28 Psychological Factors: Learning Affects both attitudes and perceptions Affected by social experiences © 2023 McGraw Hill Limited 4-29 Entrepreneurial marketing 4.1: Juiced for Success: Greenhouse Organic juices packaged in reusable glass bottles. Demand forced expansion – leading to three new shops. Organic ingredients Greenhouse uses intriguing product names such as Farma-C and a line of “greatest hits” that come from local to catch the attention of consumers. Canadian farms. © 2023 McGraw Hill Limited 4-30 Social Factors: Family Decision makers Influencers Family members often influence buying decisions. © 2023 McGraw Hill Limited 4-31 Social Factors: Reference Groups Groups: Provide: Family Information Friends Rewards Co-workers Self-image Famous people © 2023 McGraw Hill Limited 4-32 Social Factors: Reference Groups What reference group is evoked by these Birkenstock sandals? © 2023 McGraw Hill Limited 4-33 Social Factors: Culture Shared meanings, beliefs, morals & customs Your culture group can be your school, country, religion Culture greatly influences consumer behaviour Marketers must understand differences Marketers work to understand consumer culture and respond with products such as halal among countries meats to meet specific needs. © 2023 McGraw Hill Limited 4-34 Situational Factors Purchase Shopping Temporal State Situational factors may influence your purchase decisions. If you are buying jewellery for yourself, you might browse the clearance counter at People’s Jewellers (top picture). But if you are buying a gift for your best friend’s birthday, you may go to Tiffany & Co (bottom picture). © 2023 McGraw Hill Limited 4-35 Test Your Knowledge When retailers and service providers have developed unique images that are based at least in part on their internal environment, they are using? A) Salespeople B) Store atmospherics C) Crowding D) In-store demonstrations © 2023 McGraw Hill Limited 4-36 Involvement & Consumer Buying Decisions © 2023 McGraw Hill Limited 4-37 Types of Buying Decisions Extended Problem Solving Limited Problem Solving Impulse Buying Habitual Decision Making Typically, fashion apparel purchases (left) require extended problem solving, whereas grocery shopping normally requires limited problem solving (right). © 2023 McGraw Hill Limited 4-38 Test Your Knowledge What type of buying decision requires the least amount of time and effort? A) extended B) habitual decision making C) limited problem solving D) impulse buying © 2023 McGraw Hill Limited 4-39 Chapter 5 Business-to- Business Marketing © 2023 McGraw Hill Limited 5-1 Chapter 5: Business-to-Business (B2B) Marketing LEARNING OBJECTIVES LO1 Describe the nature and composition of B2B markets LO2 Explain the key differences between B2B buying and B2C buying LO3 List the steps in the B2B buying process LO4 Identify the roles within the buying centre LO5 Detail different buying situations © 2023 McGraw Hill Limited 5-2 Business-to-Business Marketing l The Mastercard Track Business Payment Service payment system to facilitate, enable, and standardize the ways money moves from one firm to another. © 2023 McGraw Hill Limited 5-3 B2B Marketing l Buying & selling goods or services to be used: l in the production of other goods & services, l for consumption by the buying firm, or l for resale by wholesalers & retailers l Distinction between B2B & Business to Consumer (B2C): l Who is the ultimate purchaser & user of the product or service? © 2023 McGraw Hill Limited 5-4 B2B Markets l B2B firms focus their efforts on serving specific types of customer markets to create value for those customers. l Shopify – helping businesses establish an online presence l Apple & Google - integrate their operating systems into cars. Apple (left) and Google (right) both offer smartphone connectivity for specific car manufacturers. © 2023 McGraw Hill Limited 5-5 B2B Markets © 2023 McGraw Hill Limited 5-6 Test Your Knowledge B2B firms focus their efforts on serving _______________ to create value for those customers. A) new markets B) wholesalers and distributors C) resellers D) specific target markets © 2023 McGraw Hill Limited 5-7 Manufacturers or Producers Buy raw materials, components or parts Manufacture their own goods © 2023 McGraw Hill Limited 5-8 Resellers Manufacturer Reseller Retailer © 2023 McGraw Hill Limited 5-9 Institutions Schools, Museums, Religious Organizations © 2023 McGraw Hill Limited 5-10 Government l Canadian Government spends $240B annually buying goods & services l Provincial and local governments also make significant purchases l Firms specialize in selling to government MERX is the most complete source of public tenders, private tenders, U.S. tenders, and private-sector construction news available in Canada. © 2023 McGraw Hill Limited 5-11 Key Challenges of Reaching B2B Clients l Identify decision makers in organization who authorize or influence purchases l Understand the buying process of each potential client l Identify factors that influence the buying process of potential clients © 2023 McGraw Hill Limited 5-12 Test Your Knowledge MERX is the most complete source of tenders available in: A) United States, Canada, Mexico B) United States C) Canada D) United States and Mexico © 2023 McGraw Hill Limited 5-13 Differences Between B2B & B2C Markets Market Characteristics Differences Product Between Characteristics Business Buying Process and Characteristics Consumer Markets Marketing Mix Characteristics © 2023 McGraw Hill Limited 5-14 Differences Between B2B & B2C Markets Market Characteristics Differences Between Demand for business products is derived Business & Fewer customers, more Consumer geographically concentrated & orders are larger Markets Demand is more inelastic © 2023 McGraw Hill Limited 5-15 Differences Between B2B & B2C Markets Product Characteristics Differences Between Products technical in Business & nature, purchased based on specifications Consumer Mainly raw & semi-finished goods Markets Heavy emphasis on delivery time, technical assistance, after sale service, financing © 2023 McGraw Hill Limited 5-16 Differences Between B2B & B2C Markets Buying Process Characteristics Buying decisions more complex Differences Competitive bidding, negotiated Between pricing, complex financial arrangements Business & Qualified, professional buyers - more Consumer formalised buying process Buying criteria and objective specified Markets Multiple participants in purchase decisions Reciprocal arrangements common Close long-term relationships Online buying common © 2023 McGraw Hill Limited 5-17 Differences Between B2B & B2C Markets Marketing Mix Characteristics Differences Between Direct selling & physical distribution often essential Business & Advertising more technical, Consumer promotions emphasize personal selling Markets Price often negotiated, inelastic, affected by trade/quantity discounts © 2023 McGraw Hill Limited 5-18 The B2B Buying Process © 2023 McGraw Hill Limited 5-19 Stage 1: Need Recognition l Can be generated internally or externally l Sources for recognizing new needs: – Suppliers – Salespeople – Competitors The first step in the B2B decision process is to recognize that the schools need to purchase 1,000 tablets. © 2023 McGraw Hill Limited 5-20 Stage 2: Product Specification Suppliers use to develop proposals Can be done collaboratively with suppliers © 2023 McGraw Hill Limited 5-21 Stage 3: Request For Proposal (RFP) Process l Buying organizations invite alternative suppliers to bid on supplying their required components or specifications © 2023 McGraw Hill Limited 5-22 Stage 4: Proposal Analysis & Supplier Selection l Often several vendors are negotiating against each other l Considerations other than price play a role in final selection © 2023 McGraw Hill Limited 5-23 Test Your Knowledge The ______ is a common process through which buying organizations invite alternative suppliers to bid on supplying their required components or specifications. A) request for proposals B) request for pricing C) request for partnership D) requirement fact proposal © 2023 McGraw Hill Limited 5-24 Stage 5: Order Specification (Purchase) l Firm places the order l The exact details of the purchase are specified l All terms are detailed including payment © 2023 McGraw Hill Limited 5-25 Stage 6: Vendor Performance Assessment Using Metrics (4) (3) (1) (2) Importance X Vendor Key Issues Importance Score Performance Performance (2) X (3) Customer.40 5 2.0 Service Issue.20 4 0.8 Resolution Delivery.10 5 0.5 Quality.30 3 0.9 Total 1.0 4.2 © 2023 McGraw Hill Limited 5-26 The Buying Centre The Buying Centre Corporate Culture Buying Situations © 2023 McGraw Hill Limited 5-27 The Buying Centre © 2023 McGraw Hill Limited 5-28 Test Your Knowledge In most large organizations, who is typically responsible for buying decisions? A) the CFO B) the procurement manager C) several people D) the vice-president © 2023 McGraw Hill Limited 5-29 Organizational Culture Organizational Culture reflects the set of values, traditions, and customs that guides its managers’ and employees’ behaviour DHL is collaborating with vendors in its innovation centres to develop new robotics technology that can be used to improve productivity in its distribution centres. © 2023 McGraw Hill Limited 5-30 Organizational Culture © 2023 McGraw Hill Limited 5-31 Building B2B Relationships l There is a vast variety of ways to enhance relationships, and these methods seem to be advancing and evolving by the minute. l For example, blogs and social media can: l build awareness, provide search engine results, l educate potential and existing clients about products or services, l warm up a seemingly cold corporate culture. © 2023 McGraw Hill Limited 5-32 Building B2B Relationships Bosch provides free tools to social media micro-influencers, who then review the products on their own YouTube channels. © 2023 McGraw Hill Limited 5-33 Buying Situations l Purchasing l Buying for the first additional time units or l Likely to be products quite that have involved been previously l The buying purchased centre will probably use l Most B2B all six steps purchases in the buying fall into this l Purchasing a similar product but category process changing specifications l Current vendors have an advantage © 2023 McGraw Hill Limited 5-34 Test Your Knowledge In what type of buying situation is the decision likely to be the most involved? A) modified rebuy B) straight rebuy C) Internet purchase D) new buy © 2023 McGraw Hill Limited 5-35 Chapter 6 Segmentation, Targeting, and Positioning © 2023 McGraw Hill Limited 6-1 Chapter 6: Segmentation, Targeting, and Positioning LEARNING OBJECTIVES LO1 Describe the bases marketers use to segment a market LO2 Identify the criteria for determining the attractiveness of a segment & whether it is worth pursuing (targeting) LO3 Explain the differences among targeting strategies: undifferentiated, differentiated, concentrated, or micromarketing LO4 Describe positioning & how firms do it © 2023 McGraw Hill Limited 6-2 Segmentation, Targeting, & Positioning l Who is the target market for SoCIAL LITE Vodka? l Product location strategy l Multiple segmentation strategies were employed © 2023 McGraw Hill Limited 6-3 The segmentation-targeting- position process © 2023 McGraw Hill Limited 6-4 Step 1: Establish Overall Strategy or Objectives Consistent with mission statement Derived from mission & current state © 2023 McGraw Hill Limited 6-5 Step 2: Segmentation Bases Segmentation Sample Segments Base Geographic Continent (North America, Asia, Europe, Africa), country, region (West Coast, Prairies, Central, Maritimes), province, city, urban, suburban, rural, climate Demographic Age, gender, income, education, occupation, race, marital status, family size, family life cycle, religion, ethnic background (white, black, Asian, Indian, German, Irish, Arab), generational cohort (baby boomer, Generation X, Generation Y), home ownership Psychographic Lifestyle (Innovators, Thinkers, Achievers, Experiencers, Believers, Strivers, Makers, Survivors), personality/self-concept (conservative, liberal, adventuresome, outgoing, health- and fitness-conscious), social class (upper class, middle class, working class) Behavioural Benefits sought (convenience, economy, prestige, quality, speed, service, environmental impact), usage (heavy, moderate, light, non-user, ex-user, potential user, first-time user), loyalty (not loyal, somewhat loyal, completely loyal) © 2023 McGraw Hill Limited 6-6 Geographic Segmentation l Divide market into separate geographic units l Countries, regions provinces, cities, neighbourhoods, climate, etc. l Develop appropriate marketing programs © 2023 McGraw Hill Limited 6-7 Test Your Knowledge Geographic segmentation is most useful for companies whose products satisfy needs that vary by __________. A) gender B) region C) age D) nationality © 2023 McGraw Hill Limited 6-8 Test Your Knowledge Geographic segmentation is most useful for companies whose products satisfy needs that vary by __________. A) gender B) region C) age D) nationality © 2023 McGraw Hill Limited 6-9 Demographic Segmentation l Most common method l Divide market into groups based on: – gender – age – ethnic group – family lifecycle stage – household type – income – Other, e.g. occupation, education, religion l Census excellent source of segmentation data © 2023 McGraw Hill Limited 6-10 Psychographic Segmentation How consumers describe themselves: l Self-values l Self-concept l Lifestyles Marketers such as MEC want their ads to appeal to one’s self-concept. “I’m like them, so I should buy their products.” © 2023 McGraw Hill Limited 6-11 DESCRIPTION OF VALS CATEGORIES Innovators Thinkers Believers Achievers Successful, Old guard, respect Hold conservative belief Goal-oriented sophisticated, take- authority systems, deep-rooted professionals charge people Well-educated moral codes View money as source High-esteem Mature, satisfied, Value family, religion, of authority Change leaders, open comfortable community Deep commitment to to new ideas and Carefully research and Value stability career, family technology plan before taking Dislike ambiguity Respect authority and Actively seek new action Not looking to change the status quo information Appreciate historical society Active consumers Experiment with perspective Predictable, loyal Favour prestige confidence, future Act in accordance with consumers products, conscious of oriented what’s right Choose familiar peers Problem-solvers Not influenced by latest products, established Embrace technology Active consumers, trends brands with productivity cultivated tastes benefits Strivers Experiencers Makers Survivors Live in the moment Seek variety, excitement Practical people with Oldest consumers Trendy, fun-loving Enthusiastic, impulsiveconstructive skills Cautious, risk averse, Money defines success consumers Strong mechanical and feel world is changing Favour stylish products Want it all mentality automotive interests too fast Revolving rates of Active in sports and Traditional views of Concern for safety, temporary social activities family, work, gender security unemployment Heightened sense of roles Comfortable with Looking for a better life, visual stimulation Protect what they see routine and the familiar not easily achieved Keep up with latest as theirs Loyal to favourite Active yet impulsive fashions Value self-sufficiency brands consumers Want to look good, Suspicious of new ideas Laggards in technology have cool stuff Unimpressed with Focus on needs vs. material possessions © 2023 McGraw Hill Limited wants 6-12 VALS TYPES It is just as easy to identify Thinkers (left) as it is Makers (right). A person is given the VALS™ questionnaire, and the VALS™ program at SRIC-BI runs the answers through the computer for scoring to determine the VALS™ type. © 2023 McGraw Hill Limited 6-13 Behavioural Segmentation Benefits Behavioural Usage Occasion Segmentation Rate Loyalty © 2023 McGraw Hill Limited 6-14 Geodemographic Segmentation l How consumers describe themselves using a combination of geographic, demographic, and lifestyle characteristics to segment a market. l “Birds of a feather flock together.” © 2023 McGraw Hill Limited 6-15 Geodemographic Segmentation PSYTE clusters Cluster Urban Lower Middle (U4): Suburban Affluent (S1): Suburban Affluent (S1): Name Urban Bohemia Suburban Affluence Asian Heights Description From body piercing to This cluster with a flair for fine Asian ancestries combined with tattoos, Urban Bohemia living represents both old and hard work and growing wealth includes a diverse population new wealth. Because wealth create and mould these upscale by design. A neighbourhood accumulates throughout life neighbourhoods. Asian Heights with a youthful skew, this stages, this cluster exhibits an represents the affirmation of cluster occupies itself in older skew with many empty dreams cultivated through a variety of artistic, retail, nests. Suburban Affluence generations of immigrants and and generally creative indexes high on managerial often through hardship. These employment. Men and and technical employment families boost local economies women employed in cultural, and are married with children. as well as family prospects. artistic, and entertainment Asian Heights indexes high related on Chinese, Korean, and jobs abound. Japanese immigration as well Household maintainers under as households of six or more age 25, many with college persons. degrees, are also Average $46,000 $166,000 $96,000 Household Income Source: Used by permission of Pitney Bowes Software. © 2023 McGraw Hill Limited 6-16 Test Your Knowledge Which of the following tools is widely used for geodemographic segmentation? A) PSYTE B) LSAT C) GNP D) LIMRA © 2023 McGraw Hill Limited 6-17 Test Your Knowledge Which of the following tools is widely used for geodemographic segmentation? A) PSYTE B) LSAT C) GNP D) LIMRA © 2023 McGraw Hill Limited 6-18 Step 3: Evaluate Segment Attractiveness © 2023 McGraw Hill Limited 6-19 Identifiable l Who is in their The Gap has identified several distinct segments to pursue. market? Two of its brands: Gap (left) and Gap Kids (below) appeal to different target markets. l Are the segments unique? l Does each segment require a unique marketing mix? © 2023 McGraw Hill Limited 6-20 Reachable Know the product exists Understand what it can do Recognize how to buy La Senza must ensure that any new segment it considers is identifiable, reachable, responsive, substantial, and profitable. © 2023 McGraw Hill Limited 6-21 Responsive Customers must: l React positively to firm’s offering l Move toward the firm’s products/services l Accept the firm’s value proposition © 2023 McGraw Hill Limited 6-22 Substantial & Profitable l Size matters l Too small & the segment is insignificant, & will not be profitable l Growth potential equally important Which segment will be more profitable to Mark’s: its traditional market for industrial workwear (above), or the top-line casual apparel segment (right)? © 2023 McGraw Hill Limited 6-23 Segment Profitability – How to Determine? Segment size (# of people in segment) = 60 million (