CHAPTER 3

FOCUSING MARKETING STRATEGY WITH SEGMENTATION

AND POSITIONING

When You Finish This Chapter, You Should

1. Understand why marketing strategy planning involves a process of

narrowing down from broad opportunities to a specific target
market and marketing mix.

2. Know about the different kinds of marketing opportunities.

3. Understand why opportunities in international markets should be

considered.

4. Know about defining generic markets and product-markets.

5. Know what market segmentation is and how to segment product-

markets into submarkets.

6. Know three approaches to market-oriented strategy planning.

7. Know dimensions that may be useful for segmenting markets.

8. Know what positioning is--and why it is useful.

9. Understand the important new terms (shown below).

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breakthrough opportunities market segment

competitive advantage single target market approach

differentiation multiple target market

S.W.O.T. analysis approach

market penetration combined target market

market development approach

product development combiners

diversification segmenters

market qualifying dimensions

generic market determining dimensions

product-market clustering techniques

market segmentation customer relationship management

segmenting positioning

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Outline of Chapter 3: FOCUSING MARKETING STRATEGY WITH
SEGMENTATION AND POSITIONING

INTRODUCTION

WHAT ARE ATTRACTIVE OPPORTUNITIES?

Transparency 21 "Focusing Marketing Strategy and

Evaluating Market Opportunities"

• Breakthrough opportunities are best

BREAKTHROUGH OPPORTUNITIES--opportunities that help

innovators develop hard-to-copy marketing strategies that will be
very profitable for a long time.

• Competitive advantage is needed--at least

COMPETITIVE ADVANTAGE--a firm has a marketing mix that

the target market sees as better than a competitor's mix.

Overhead 21 "Competitive Advantage"

• Avoid hit-or-miss marketing with a logical process

Transparency 22 (Exhibit 3-1) "Overview of Marketing

Strategy Planning Process"

MARKETING STRATEGY PLANNING PROCESS HIGHLIGHTS

OPPORTUNITIES

Overhead 22 "Marketing Strategy Planning Process"

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 • Process narrows down from broad opportunities to specific
strategy

• Segmentation helps pinpoint the target

• Narrow down to a superior marketing mix

DIFFERENTIATION--the marketing mix is distinct from and

better than what is available from a competitor.

• Screening criteria make it clear why you select a strategy

• S.W.O.T. analysis highlights advantages and disadvantages

S.W.O.T. ANALYSIS--identifies and lists the firm’s strengths and

weaknesses and its opportunities and threats.

TYPES OF OPPORTUNITIES TO PURSUE

Transparency 23 (Exhibit 3-2) "Four Basic Types of

Opportunities"

Overhead 23 "Examples of Different Types of

Opportunities"

• Market penetration

MARKET PENETRATION--trying to increase sales of a firm's

present products in its present markets--probably through a more
aggressive marketing mix.

• Market development

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 MARKET DEVELOPMENT--trying to increase sales by selling
present products in new markets.

• Product development

PRODUCT DEVELOPMENT--offering new or improved products

for present markets.

• Diversification

DIVERSIFICATION--moving into totally different lines of

business--perhaps entirely unfamiliar products, markets, or even
levels in the production-marketing system.

• Which opportunities come first?

INTERNATIONAL OPPORTUNITIES SHOULD BE CONSIDERED

• The world is getting smaller

• Develop a competitive advantage at home and abroad

• Get an early start in a new market

• Find better trends in variables

SEARCH FOR OPPORTUNITIES CAN BEGIN BY

UNDERSTANDING MARKETS

• Find breakthrough opportunities

• What is a company's market?

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 MARKET--a group of potential customers with similar needs who
are willing to exchange something of value with sellers offering
various goods and/or services--that is, ways of satisfying those
needs.

Transparency 24 (Exhibit 3-3) "Narrowing Down to Target

Markets"

• Don't just focus on the product

• From generic markets to product-markets

GENERIC MARKET--a market with broadly similar needs--and

sellers offering various--often diverse--ways of satisfying those
needs.

PRODUCT-MARKET--a market with very similar needs--and

sellers offering various close substitute ways of satisfying those
needs.

• Broaden market definitions to find opportunities

NAMING PRODUCT-MARKETS AND GENERIC MARKETS

• Product type should meet customer needs

• No product type in generic market names

Transparency 25 (Exhibit 3-4) "Relationship between

Generic and Product-Market Definitions"

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MARKET SEGMENTATION DEFINES POSSIBLE TARGET
MARKETS

Overhead 24 "How Readings Relate to Market

Segmentation"

• Market segmentation is a two-step process

MARKET SEGMENTATION--a two-step process of: (1) naming

broad product-markets and (2) segmenting these broad product-
markets in order to select target markets and develop suitable
marketing mixes.

• Naming broad product-markets is disaggregating

• Market grid is a visual aid to market segmentation

Overhead 25 (Exhibit 3-5) "A Market Grid Diagram with

Submarkets"

• Segmenting is an aggregating process

SEGMENTING--an aggregating process that clusters people with

similar needs into a "market segment."

MARKET SEGMENT--a (relatively) homogeneous group of

customers who will respond to a marketing mix in a similar way.

Transparency 26 (Exhibit 3-6) "Every Individual Has His

or Her Own Unique Position in a Market--Those with
Similar Positions Can Be Aggregated into Potential Target
Markets: A. Product-market showing three segments," and
"B. Product-market showing six segments"

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 • How far should the aggregating go?

• Criteria for segmenting a broad product-market

Overhead 26 "Criteria for Segmenting"

Transparency 27 "Criteria for Segmenting"

• Target marketers aim at specific targets

SINGLE TARGET MARKET APPROACH--segmenting the

market and picking one of the homogeneous segments as the firm's
target market.

MULTIPLE TARGET MARKET APPROACH--segmenting the

market and choosing two or more segments, then treating each as a
separate target market needing a different marketing mix.

COMBINED TARGET MARKET APPROACH--combining two

or more submarkets segments into one larger target market as a
basis for one strategy.

Overhead 27 "Three Ways to Develop Market-Oriented

Strategies"

Transparency 28 (Exhibit 3-7) "Target Marketers Have

Specific Aims"

• Combiners try to satisfy "pretty well"

COMBINERS--try to increase the size of their target markets by

combining two or more segments.

• Too much combining is risky

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 • Segmenters try to satisfy "very well"

SEGMENTERS--aim at one or more homogeneous segments and

try to develop a different marketing mix for each segment.

Transparency 29 (Exhibit 3-8) "There May Be Different

Demand Curves in Different Market Segments"

• Segmenting may produce bigger sales

• Should you segment or combine?

• Profit is the balancing point

WHAT DIMENSIONS ARE USED TO SEGMENT MARKETS?

• Segmenting dimensions guide marketing mix planning

Overhead 28 (Exhibit 3-9) "Relation of Potential Target

Market Dimensions to Marketing Strategy Decision Areas"

• Many segmenting dimensions may be considered

Overhead 29 "Examples of Possible Segmenting Dimensions

for Consumer Markets"

Overhead 30 (Exhibit 3-10) "Possible Segmenting

Dimensions and Typical Breakdowns for Consumer Markets"

Overhead 31 "Examples of Possible Segmenting Dimensions

for Business Markets"

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 Overhead 32 (Exhibit 3-11) "Possible Segmenting
Dimensions for Business/Organizational Markets"

• What are the qualifying and determining dimensions?

QUALIFYING DIMENSIONS--the dimensions that are relevant to

including a customer type in a product-market.

DETERMINING DIMENSIONS--the dimensions that actually

affect the customer's purchase of a specific product or brand in a
product-market.

• Determining dimensions may be very specific

Overhead 33 "Segmenting Dimensions"

Transparency 30 (Exhibit 3-12) "Finding the Relevant

Segmenting Dimensions"

• Determining dimensions may change

• Qualifying dimensions are important too

• Different dimensions needed for different submarkets

• Ethical issues in selecting segmenting dimensions

Transparency 31 "Segmenting the Broad Market for Motel

Guests in a Metropolitan Area"

Overhead 34 "Seven-Step Approach to Segmenting

Consumer Product-Markets"

• International marketing requires even more segmenting

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 • There are more dimensions--but there is a way

MORE SOPHISTICATED TECHNIQUES MAY HELP IN

SEGMENTING

• Clustering usually requires a computer

CLUSTERING TECHNIQUES--approaches used to try to find

similar patterns within sets of data.

Overhead 35 "Toothpaste Market Segment Description"

• Customer database can focus the effort

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)--a

method where the seller fine-tunes the marketing effort with
information from a detailed customer database.

Overhead 36 "Customer Relationship Management (CRM)"

DIFFERENTIATION AND POSITIONING TAKE THE CUSTOMER

POINT OF VIEW

• Differentiate the marketing mix to serve customers better

• Positioning is based on customers' views

POSITIONING--an approach that refers to how customers think

about proposed and/or present brands in a market.

Overhead 37 "Positioning and Differentiation"

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 Transparency 32 (Exhibit 3-13) "'Product Space'
Representing Consumers' Perceptions for Different Brands
of Bar Soap"

• Each segment may have its own preferences

-Combining versus segmenting

• Positioning as part of broader analysis

SUPPLEMENTARY POWERPOINT ARCHIVE

“Competitive Advantage,” Overhead 21

Shout and Crème Saver ads (p. 63)

“Focusing Marketing Strategy and Evaluating Market Opportunities,” Transparency 21

“Marketing Strategy Planning Process,” Overhead 22

“Overview of Marketing Strategy Planning Process,” Transparency 22: (Exhibit 3-1)

Audi Quattro ad (p. 65)

“Examples of Different Types of Opportunities,” Overhead 23

“Four Basic Types of Opportunities,” Transparency 23: (Exhibit 3-2)

Chinese McDonald’s photo (p. 67)

Lipton website and photo of Asian street scene (p. 69)

Olympus, Vivitar, and Sony camera ads (p. 70)

“Narrowing Down to Target Markets,” Transparency 24: (Exhibit 3-3)

Hallmark logo (p. 71)

Imark and MapLinx ads (p. 72)

“Relationship between Generic and Product-Market Definitions,” Transparency 25: (Exhibit 3-

4)

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“How Readings Relate to Market Segmentation,” Overhead 24

Opel van photo (p. 74)

“A Market Grid Diagram with Submarkets,” Overhead 25: (Exhibit 3-5)

“Every Individual Has His or Her Own Unique Position in a Market—Those with Similar
Positions Can Be Aggregated into Potential Target Markets: A. Product-market showing three
segments, and B. Product-market showing six segments,” Transparency 26: (Exhibit 3-6)

Heinz ad (p. 76)

“Criteria for Segmenting,” Overhead 26

“Criteria for Segmenting,” Transparency 27

“Three Ways to Develop Market-Oriented Strategies,” Overhead 27

“Target Marketers Have Specific Aims,” Transparency 28: (Exhibit 3-7)

“There May Be Different Demand Curves in Different Market Segments,” Transparency 29:
(Exhibit 3-8)

Village.com website (p. 79)

“Relation of Potential Target Market Dimensions to Marketing Strategy Decision Areas,”

Overhead 28: (Exhibit 3-9)

“Examples of Possible Segmenting Dimensions for Consumer Markets,” Overhead 29

“Possible Segmenting Dimensions and Typical Breakdowns for Consumer Markets,” Overhead
30: (Exhibit 3-10)

“Examples of Possible Segmenting Dimensions for Business Markets,” Overhead 31

Sorel hiking boots ad (p. 80)

“Possible Segmenting Dimensions for Business/Organizational Markets,” Overhead 32: (Exhibit

3-11)

“Segmenting Dimensions,” Overhead 33

“Finding the Relevant Segmenting Dimensions,” Transparency 30: (Exhibit 3-12)

Ritz and Club Med ads (p. 84)

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“Segmenting the Broad Market for Motel Guests in a Metropolitan Area,” Transparency 31

“Seven-Step Approach to Segmenting Consumer Product-Markets,” Overhead 34

“Toothpaste Market Segment Description,” Overhead 35

“Customer Relationship Management (CRM),” Overhead 36

Bic and Target ads (p. 86)

“’Product Space’ Representing Consumers’ Perceptions for Different Brands of Bar Soap,”
Transparency 32: (Exhibit 3-13)

“Positioning and Differentiation,” Overhead 37

NOTES ON THE INTERACTIVE EXERCISE

Overview of the Exercise on Marketing Strategy

The purpose of this exercise is to help students extend their conceptual knowledge of the
marketing strategy planning process, specifically as it relates to the broad types of growth
strategies that a firm might choose to pursue.

For each of the four types of growth opportunities, students are shown statements describing
marketing actions undertaken in the context of specific brands. Students are expected to select
the statement description that best illustrates the particular type of strategic opportunity that is
under consideration.

Concept Review

The overarching purpose of strategic marketing planning is to match a firm’s capabilities,

resources, and objectives to attractive opportunities that the firm is in a position to do something
about. SWOT analysis is the preferred method of identifying and evaluating opportunities in
light of the strengths and weaknesses of the firm, and the environmental forces that may
influence the success or failure of the venture. While many firms will pursue more than one type
of strategic opportunity concurrently, it is useful to distinguish the four basic types of
opportunities in terms of their similarities and differences. The strategic opportunities discussed
below represent the four combinations of A) present vs. new products, and B) present vs. new
markets. It may be worth reminding students that “market” in this context refers to groups of
consumers / businesses with a basic shared need, or new and untapped geographic locations.
“New” products are those that are new to the company and are not restricted to first time product
innovations that essentially create a new product category within an industry.

Market penetration (present product; present market) occurs when a company undertakes
various actions designed to encourage current customers to buy, consume, or in the case of
charities – contribute more.

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Market Development (present product, new market) occurs when a firm attempts to expand sales
by targeting a new user market with an existing product. Two key methods of implementing this
strategy include 1) selling an existing product to a new geographic market in which the firm
currently does not conduct business, and 2) marketing new uses of existing products to new
users.

Product Development (new product, present market) occurs when new or improved products are
developed for present markets. Restaurants frequently undertake product development when
they introduce new menu items or menu lines.

Diversification (new product, new market) is typically considered to be the riskiest opportunity
of the four, as it requires a company to move into a totally new line of business while marketing
to a new market. Risk is greater as the company’s lack of expertise and experience in both the
product (industry, competition, production process, perhaps distribution channels, etc.) and
market (targeted consumers, needs, buying habits, perhaps methods of reaching consumers)
leaves greater potential for error.

Using the Exercise

Initial Screen

Slide one uses a replication of Exhibit 3-2 to introduce the four types of strategic opportunities.
A. The interactive exercises are meant to be involving and fun for students. As you
begin the exercise, you might lighten the mood and grab students’ attention by
means of phrases such as: “{student name}, come on down! You’re the first
contestant to play our game today!”
B. The professor then asks the student volunteer to choose any one of the four
opportunities.
C. The professor clicks the portion of the strategic opportunity matrix that represents
the student’s selection.

Next Screen

The screen pertaining to the selected strategic opportunity appears.

The professor reads the descriptions to the class.

D. The professor then asks students to select the statement that exemplifies the
strategic opportunity being investigated, and clicks on the letter that corresponds
to the student’s response.
E. If the wrong response is given, a buzzer will sound, and the letter designating the
incorrect answer will turn red. For details related to right and wrong answers,
refer to the ANSWERS AND EXPLANATION section below.
F. The selection process is repeated until the correct answer is chosen, and a cash
register “Ch-ching!” sound is heard. The slide automatically transitions back to
the expanded initial screen as described below in step 3.

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Expanded Initial Screen with Correct Example

2. The four strategic opportunities are shown, with modifications.

A. Exhibit 3-2 is updated.
i. The opportunity that was previously chosen is displayed in a different
color to indicate that it has already been investigated and cannot be
reselected.
ii. The appropriate product/market grid cell is updated to show the answer
that correctly illustrates an application of that strategic opportunity.
B. The remaining strategic opportunities transition briefly.
C. The professor asks for a student volunteer to select from the three remaining types
of opportunity, and clicks on the table cell corresponding to that student’s choice.

Next Several Screens

3. The procedures described in steps 2 and 3 are repeated until all strategic marketing
opportunity types have been examined.

Final Screen

4. The final screen displays each form of strategic opportunity accompanied by the correct
statement describing marketing actions that provide that opportunity.
5. The professor clicks the indicated icon to end the exercise.

NOTE: Clicking the “X” at any time will end the exercise.

Answers and Explanations

MARKET PENETRATION
Answer A: INCORRECT, BUT DEBATABLE
This one is rather tricky. While the majority of people who purchase TV Guide do so for its
functional value, there has always existed a small group who collects TV Guide for the sake
of collecting. TV Guide’s strategy of publishing multiple covers is probably best described
as an attempt to develop and grow a market that has existed, but has traditionally been
ignored. Students may argue that A) TV Guide is actually following a market penetration
strategy since collectors existed prior to its implementation and offering multiple covers
encourages this group to buy more, or B) that it is actually an example of product
development, since the cover is different. As a counterpoint, the instructor can point out that
the new covers are simply a means by which a new use (collecting) is being satisfied, and
that promoting new uses for existing products is a means of market development. The
product itself (contents within the TV Guide) do not change, only the cover. Useful
discussion can be generated as a result of differing points of view.
Answer B: CORRECT
Promotions have always been an excellent means of penetrating the market. Until the recent
scandal, McDonald’s “Monopoly” promotion was the most successful of the company’s
games.
Answer C: INCORRECT

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 The development of a new product by a company known as an ice cream manufacturer does
not qualify as market penetration. Firms pursuing a market penetration strategy do not alter
the product being sold, or the market to which it is targeted.
Answer D: INCORRECT
This is an example of product development by Dr. Pepper.

MARKET DEVELOPMENT
Answer A: INCORRECT
Developing a new product outside current areas of expertise for a new market (mechanics,
do-it-yourselfers) is an example of diversification.
Answer B: INCORRECT
This example features a new, rather than existing product, and thus does not qualify as
market development.
Answer C: CORRECT
Offering existing products to a new geographic market never before served is an example of
market development. International expansion, or domestically expanding distribution to new
regions of the U.S. qualifies as market development. As previously noted, developing new
uses for existing products that satisfy different needs is a second form of market
development.
Answer D: INCORRECT
A local bank that develops its own Internet service division is not only serving a new national
market, it is also venturing into a new line of business outside its area of expertise. Pursuing
this opportunity would be an example of a bank engaging in diversification.

PRODUCT DEVELOPMENT
Answer A: INCORRECT
The Lean Cuisine example is best classified as diversification, as it would require new
suppliers, production facilities, channels of distribution, advertising, etc., in order to service
what is essentially a new market via products new to the company.
Answer B: INCORRECT
Frito-Lay has decided to take advantage of a market development opportunity by introducing
snack food to the Russian market.
Answer C: CORRECT
RC is developing a line of fruit-flavored ice tea beverages for their existing market of
beverage consumers. Perhaps RC is attempting to better satisfy the needs of caffeine
drinkers who don’t care for carbonated beverages, and prefer the taste of fruit to cola. The
drinks will be made available through traditional distribution channels (grocery, convenience,
mass-merchandise) and can be produced through existing production processes; beverage
production and marketing represents a core competency of the firm rather than a new
business, so capitalizing upon this opportunity would NOT be considered an example of
diversification.
Answer D: INCORRECT
The product has not changed, just the suggested usage – an example of market development.

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DIVERSIFICATION
Answer A: INCORRECT
Increasing the amount or rate of giving among current donors is an example of market
penetration.
Answer B: INCORRECT
This example best corresponds with the strategy of product development.
Answer C: INCORRECT
This example best corresponds with the strategy of product development.
Answer D: CORRECT
Saudi Arabia would clearly be a new market for Coors, as strongly held religious convictions
typically forbid the consumption of fermented beverages such as beer among the Saudi;
hand-held power tools represent a business far removed from Coors current brewing
operations.

IDEAS ON USING COLOR ADS WITH CHAPTER 3

Transparency 151
(Dun & Bradstreet) It’s what separates heads of marketing from former heads of marketing.
Dun and Bradstreet is a leading provider of business information. Its Market Spectrum
product provides a marketing manager with instant access to highly detail information about
geographically defined markets. A manager can combine data from Market Spectrum with its
own internal customer information to create reports for customer relationship management and
also to identify new market opportunities–for example, in market areas where potential demand
is not yet being tapped.

Transparency 153
(Victory Motorcycles) No, the motorcycle gods will not strike you down.
A motorcycle may fill a variety of different needs–ranging from functional needs like
transportation to emotional needs like excitement or status within some group. The marketing
mix a firm develops must consider the needs of segments in its specific target market.

Transparency 154
(Colgate-Palmolive) Colgate 2in1 toothpaste and mouthwash.
Colgate-Palmolive has long had a strong presence in the oral care product-market. It has
continued to increase sales to its current target customers with innovative new products,
including Total brand toothpaste that was launched in 1997. This ad is for another new product
that combines the benefits of toothpaste (cleaner teeth) and mouthwash (fresher breath).

Transparency 155
(ReplayTV) I use pause live TV when I order a pizza. And when the pizza guy comes. And then
later when I order Chinese. Stuff like that.
A digital TV replay/recording system may compete for customers in the same generic
market with videotape recorders as well as with other systems (like TiVo) that are more direct
rivals.

Transparency 158

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(PerformanceBike.com) For people who love bikes.
Bicycle riders make up a broad product-market. One submarket might consist of people
who want basic transportation, another of people who want exercise, another of people who are
concerned about the environment, and another of people who are just passionate (about cycling,
that is).

Transparency 160
(Texaco) With a little energy from Texaco, a mind can stay open all night. We’re making sure
the people of Thailand get the power they need.
Firms like Texaco look for market opportunities around the world.

Transparency 162
(Saturn) Somewhere between sliced bread and instant oatmeal, there’s the third door.
Segmenting dimensions should be useful for identifying customers and deciding on
marketing mix variables.

Transparency 163
(Bandag) There are plenty of tires that will fit your trucks. We make tires that fit your
application.
In business markets, firms often segment their markets based on how customers will use
the firm's product.

Transparency 166
(Claritas) Present the right product at the right time.
Claritas' Intelliserve system can be used by a firm as part of a customer-relationship
management (CRM) program. For example, when a customer is contacted the system helps the
salesperson determine opportunities for cross-selling of different products in the firm's product
line.

Transparency 170
(SRDS) Consumer lifestyles and demographics in one source—The Lifestyle Market Analyst!
Firms often rely on demographic data to better understand their target markets and to
make descriptions of target market segments more operational; for example, many media
describe their audiences in demographic terms so that a marketer can more effectively match
promotional media to the characteristics of the target segment.

Transparency 174
(Pringles) PringlePaks are here! Use it to pack 7 days of great tasting, well-protected Pringles
Chips from just one can!
Marketing managers for Pringles are likely to increase their penetration with a packaging
innovation that makes it easier to put Pringles in a kid's lunch bag. For some consumers, good
taste in a snack is the qualifying dimension, but the brand of snack they choose will be
determined by what it easy to pack (without it crumbling into dust before lunch!).

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Transparency 176
(Claritin) Cielos azules desde hoy.
Spanish language ads for Claritin are part of a target marketing effort focused on the
rapidly growing market of Hispanic Americans.

Transparency 177
(MailStation) E-mail for when I’m up to my eyeballs in strained peas.
The MailStation is a product that meets the needs of target customers who want
convenient access to email services but without the expense, complications, hassle, and space
requirements of a general-purpose desktop personal computer. The email needs of a busy parent
may be quite different from the email needs of a business user--and may require a very different
marketing mix.

Transparency 178
(Cirio) Experts in tomato sauce prefer Cirio.
In Italy, Cirio is a well known brand name and it is a marketing strength. On the other
hand, in countries where Cirio would like to expand sales and market share it is not so well
known--and it may take significant marketing effort, over a period of time, before consumers
have in mind the positioning that "Experts in tomato sauce prefer Cirio."

Transparency 180
(efruitinternational.com) The buyer is in Tokyo. The shipping company is in Oslo. The packer
is in Vero Beach. The banker is in Atlanta. Now they can all meet in one place.
Many firms are seeing opportunities for new growth in international markets, and the
growth of e-commerce is likely to accelerate this trend.

Transparency 183
(Allen Edmonds) In basket. Out basket. Picnic basket. Allen-Edmonds shoes make every day a
walk in the park.
Allen-Edmonds offers a complete product line that is designed to meet the different needs
of different target consumers.

Transparency 185
(Canon PowerShot S100 Digital Elph) Any camera can be digital. Only one can be an ELPH.
Different camera companies may compete with each other in the same product-market,
but their offerings are likely to appeal to different market segments with different needs.

Transparency 192
(Sanford) ------ as silk. Now, when you need a smooth pen, you’ll never draw a blank. Uni-bal.
Smooth. Real Smooth.
The Uni-bal pen has been developed so that it writes more smoothly that most other
inexpensive pens, and because that point of differentiation is emphasized in ads consumers are
more likely to remember that positioning.

Transparency 195

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(BB&T) At BB&T, we don’t think there’s anything small about your business.
BB&T develops different marketing mixes for different target markets, including the
segment of small businesses that has grown rapidly during the past decade. In developing a
marketing mix for this small business group, BB&T has learned that it is usually better to focus
on the needs satisfied by products rather than on the product characteristics themselves.

Transparency 199
(Godiva) The Godiva of cookies. They make other cookies seem like child’s play…
Many cookie companies see kids as their primary target market, but Godiva has a
different target segment for its high quality cookies--and its whole marketing mix is different
than what is typical for cookies.

Transparency 200
(Savin) Is your connection with Xerox getting a little frayed?
Savin wants target customers to view its service and quality as different from and better
than what they can get from Xerox–a competitor that is well established in the market.

Transparency 202
(FocusVision Worldwide) Video transmission of live international focus groups…right to your
office.
Advances in information technology are making it easier and faster for marketing
managers to learn about and respond to opportunities in international markets.

Transparency 203
(Prestone) Is there anyone else? Stock Prestone Antifreeze Coolant and forget about the
competition.
Prestone developed its LowTox line of antifreeze so that it would provide an added
margin of safety to pets and wildlife in the event of a spill or overflow. All antifreeze is
designed to keep water from freezing, so this differentiation of its product may be the
determining dimension that encourages some target customers to select the Prestone brand.

Transparency 205
(Michelin) Because so much is riding on your tires.
Over time, Michelin's marketing mix has focused on premium quality and safety, and that
positioning and differentiation has been reinforced with Michelin's creative advertising. Some
segments may be more focused on other features–like a low price–but interest in safety is a need
that applies to most consumers.

Transparency 206
(Campbell Soup Company) If it were any easier it would heat itself. The great taste of
Campbell’s is now in an easy-open pop top.
Campbell's is now creating more different types of soups to meet the needs of different
target markets. Similarly, its easy-open pop top might be the determining dimension for campers
or other consumers for whom convenience is the important factor.

Transparency 207

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(Kellogg Company Morningstar Farms) Don’t you want some burger to love?
Morningstar Garden Veggie Patties offer the benefit of quality ingredients and seasonings
to provide consumers with a bolder flavor. Many consumers are interested in foods that
contribute to a more healthy diet, but (within the set of healthy-food alternatives that they
consider) excellent taste is often the key factor that determines which particular brand they will
choose. By focusing on excellent flavor in both its product and its promotion, the Morningstar
Garden Veggie Patties brand is trying to build a competitive advantage with this target market.

Transparency 208
(IMPACTMedia) Sampling waste illustrated. Zip Codes. Pinpointing.
Customer relationship management efforts rely on a customer database to develop more
targeted marketing efforts–which should result in a higher return on marketing spending.
Knowing exactly where target customers are located is extremely important in developing
promotion and place plans.

Transparency 209
(Nippon Yusen Kaisha NYK Line) We’re changing the shape of shipping, again.
International marketing efforts often depend on logistics systems that can efficiently and
effectively handle bulky cargo--whether it's massive industrial machines, vehicles, containers, or
even trains. NYK, which is based in Tokyo, has a fleet of ships that is designed to address this
challenge for its customers. NYK is always thinking of new methods and vessel configurations
to accommodate a wide variety of cargos and thus meet the needs of different segments of
business customers.

Transparency 212
(RBI Water Heaters) If you want to know what it’s like to service our competitors’ water heaters,
start peeling.
RBI differentiates its industrial water heaters by making it easier to repair or replace
major component parts, which may make all the difference in a purchase decision.

PERSPECTIVES ON TEACHING CHAPTER 3--FOCUSING MARKETING

STRATEGY WITH SEGMENTATION AND POSITIONING

A key challenge of marketing strategy planning--and in fact of all strategy decisions in business--
is to figure out what the focus and priorities should be. If those decisions are made well, it is
much easier to be effective in integrating the individual decisions that support that focus. Thus,
in this chapter we introduce a model of the overall marketing strategy planning process that helps
students see what types of thinking and analysis are involved in narrowing down from "all
possible opportunities" to a specific “best” strategy (target market and marketing mix). And this
specific strategy should offer the target market superior customer value--and yield for the firm a
real competitive advantage and superior marketing results. Faculty who have taught from earlier
editions of Basic Marketing will realize that this exhibit is simply a visual tool for organizing the
topics covered in the text. However, by presenting the ideas in this fashion it makes it clearer
that a marketing manager needs to have a logical and clear process for analyzing each marketing
situation and for narrowing down to the specific strategy that the firm will pursue.

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It makes sense to devote some time to this idea and to an overview of the topics in this exhibit--
relating them to the structure of your course and reading assignments in the text. Emphasize that
at this point in the course this exhibit just provides a broad overview--a "quick summary" of a
way of thinking--but that as the course evolves, they will become more expert on the many
decisions and factors that are involved in understanding each of the individual elements in the
framework and how they relate to each other. If you return to this exhibit in subsequent classes
as new topics are introduced, students will more clearly see their progress on the road toward
developing effective marketing skills.

Once the general framework is introduced, students will have a clearer understanding of the role
of Chapter 3 and the discussion of material related to that reading.

Analyzing and identifying potential target market opportunities is one of the most important--and
also one of the most challenging--marketing jobs. In the same vein, one of the teaching
challenges in this area is to ensure that students understand that this involves a "balancing act."
On the one hand, marketing managers should start with a view of the needs of potential
customers in a broad product-market--so that they don't fall into the trap of thinking about
opportunities only in terms of the physical product that the company currently produces (i.e., the
type of "marketing myopia" that Ted Levitt so skillfully described and illustrated in his classic
Harvard Business Review article). On the other hand, it is not adequate to just develop a vision
of the broad, generic market in which the firm wishes to compete. Rather, once the broad
product-market or generic market has been identified and analyzed, it is important to narrow
down to more specific target market opportunities that the firm can tackle--and tackle in such a
way as to develop a competitive advantage. A basic objective of this chapter is to introduce
students to these ideas and, importantly, give them workable guidelines and frameworks so that
they can do it themselves. Thus, the chapter does not simply describe the idea of market
segmentation, but rather develops the concept in sufficient depth so that the student will be able
to apply the idea in subsequent chapters and later for some company.

Before beginning discussion of the material in this chapter, it is useful to point out to students
that it is the first in a series of chapters--up to and including Chapter 8--that deal with the "target
market" aspect of marketing strategy planning. After that, the focus shifts to the 4Ps decision
areas that a marketing manager works with in meeting the needs of the target market. You may
even want to acknowledge to students that there is a "chicken and egg" question that arises here
from a teaching perspective. Subsequent chapters provide substantially more information about
dimensions of customers that can be used to facilitate market segmentation thinking. For
example, Chapter 3 introduces the idea of segmenting customers based on needs, and then the
chapters on the behavior of final consumers and business and organizational customers develops
in more detail the different types of needs that may be relevant. In the same vein, Chapter 3
introduces the idea that the size of a target market and the extent to which different segments
within a broad product-market can be combined into a single target market are important factors
in accessing an opportunity. Then, subsequent chapters on demographic dimensions of the
consumer market and the chapter on uncontrollable environments develop the specifics of these
ideas in more detail. Thus, it is useful to emphasize to students that subsequent classes and
chapters will put more flesh on the skeleton (structure) that they learn about in this chapter.

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In the same vein, the discussion of positioning and differentiation emphasizes the link--from a
broad perspective--between the target market selection and what the firm is going to do to satisfy
that market's needs in a way that results in a competitive advantage for the firm and superior
value for the customer.

The chapter-opener example focuses on Polaroid I-Zone. The Polaroid case is a very useful
vehicle for emphasizing the importance of looking at markets in terms of customer needs--not
just products that the firm already makes--and that innovative marketing managers are constantly
coming up with completely "new businesses" by identifying and developing new market
opportunities. On the other hand, this is an opportunity that will be “swamped” by the move to
digital photography as a better way to get instant photographs. While the I-Zone is a nice
example of target market thinking to create more sales and profits from a technology/product line
that Polaroid already has, it is nevertheless the case that Polaroid’s main business in the past has
been in “images” and not in “toys”—so it has to worry longer term about how the positioning
and image of its new digital photography products might be impacted by this particular
marketing mix.

The highlighted teaching case for this chapter (on page 85) focuses on Herman Miller and its
targeting of new firms and small businesses. Part of the logic for introducing this material at this
point is to prompt students to think more explicitly about the fact that these ideas apply in
business markets as well as consumer markets. The Herman Miller website is excellent and
reflects the careful segmentation thinking that goes into developing and marketing its product
lines in general. Thus, if your classroom has high-speed Internet access you might want to visit
the HM website. Ask students to comment on what aspects of the website give attention to the
segmentation and positioning issues discussed in this chapter.

The Kaepa example (on pages 78-79) is really good at showing how a firm can use target
marketing to develop a competitive advantage, even when other firms are strong or well
established with less specific targets. A good question to ask is whether firms like Nike and
Adidas could have pursued this opportunity. Students will see that it is possible to pursue
different target markets at the same time with different marketing mixes, but that it doesn't just
happen automatically. Some marketing manager has to consciously plan the strategy.

Other examples (on p. 69) focus on Purafil and JLG. One interesting aspect of these examples is
that they are both smaller firms rather than the big multinational corporations which often get the
attention. A good way to discuss the Purafil case is to point out that--in hindsight--the move by
Purafil into international markets has proven to be a good idea. But, that "hindsight" really
doesn't explain why a marketing manager for a firm, especially a smaller one like Purafil, should
be thinking about international market opportunities in the first place. This leads to a question:
What motivates a marketing manager for a small firm to bother with international markets?
Various answers to this question are provided in a section at the beginning of the chapter. As
students offer ideas stimulated by that text discussion the explanations can be linked to Purafil.
This serves as an effective way to integrate the case with other topics in the chapter and at the
same time encourage students to think again about why it is important to study strategy planning
for international markets.

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In recent years, there has been quite a lot of debate in the popular marketing press and also
among academics about the possibility, or desirability, of "global" marketing strategies. This
topic can provide some useful class discussion. In particular, you may want to remind students
that the frameworks offered in Chapter 3 with respect to market segmentation are directly
relevant for thinking about that issue. Some firms can effectively "aggregate" different segments
(including segments in different parts of the world) into a common target market because their
needs and likely responses to a marketing mix are similar. Perhaps only the details of how the
strategy is implemented (for example, the language of an ad, or the types of middlemen involved
in the channel of distribution) may differ. On the other hand, in most cases there will need to be
more significant modification of the strategy for different international markets. A number of
firms that uncritically jumped into "global" strategies have learned this lesson the hard way--after
experiencing really poor results. Students who have studied the concepts in Basic Marketing
should not find this point surprising, but it is nevertheless worth reemphasizing. Whether a
firm's target customers are domestic or foreign, different types of opportunities may require quite
different marketing mixes. Hopefully, the marketing manager can develop an overall marketing
program that builds on and is consistent with the strengths of individual strategies. However,
sloppy thinking applied to planning for international markets can lead to some very costly
mistakes.

Other examples (on p. 77 and p. 78) focus on Nvidia and Check Point Software Technologies.
These particular cases provide effective reinforcement that creative thinking about market
segmentation can help firms avoid the type of head-to-head competition that usually leads to
price cutting and thin profit margins. That topic is revisited in the next chapter on evaluating
opportunities in the marketing environment, and issues of competition and competitive
advantage have received increased emphasis throughout the text.

In previous editions of Basic Marketing, we included a detailed discussion of a seven-step

approach to segmenting product-markets--which was presented in the context of an extended
example. That approach was presented to explicitly tie together the different types of analyses
and concepts developed in this chapter. In the previous edition, we removed the discussion of
the seven-step approach--in part to reduce length and redundancy in the chapter and in part
because the strategy planning process now portrayed in Exhibit 3-1 generalizes that approach
and frames the idea of a narrowing down process in terms of the whole marketing strategy--not
just in terms of the target market selection. On the other hand, we believe that there is still great
value in using the seven-step approach to tie together topics in the segmentation area if an
instructor has time to cover it in class; further, it is still consistent with ideas developed in this
edition. Thus, instructors who would like to continue to use the seven-step approach in class
discussions will find Transparency 31 particularly useful; it is also available as a slide in the
Supplementary PowerPoint Archive for this chapter. It is a new rendition of the exhibit used in
previous editions of Basic Marketing concerning the motel market. If you have a copy of the
12th edition of Basic Marketing, you might want to check how the exhibit was used.
Alternatively, the seven-step approach is included in the Basic Marketing Hypertext Reference
which is available on the Student CD that accompanies this edition.

In this edition we have modified the discussion of database marketing to introduce the new key
term, customer relationship management (CRM), which is now being generically applied to this

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type of approach. The text does not go into a lot of detail about CRM at this point, although
many topics relevant to CRM are developed throughout the text. However, instructors should be
warned about the “sizzle” and attention that CRM is getting in the popular press. What is
possible is often not yet being achieved. Part of the reason is that many IT consulting firms are
selling their “canned” solutions for CRM, but often the canned solutions fall far short of what a
firm needs. Even though investments in this arena are significant, it will likely to be some time
before the promise of CRM and the reality of how it is implemented come together. For that to
occur, marketers (not just IT people) will need to be directly involved in determining what
information is to be stored, how it is to be organized and used, and what decisions are made with
it. This is a topic that is discussed in more detail in Chapter 8. Then, in Chapter 19 there are a
number of worked examples.

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