103: final prep

Market segmentation definition

The process of dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics.

Why do we segment the market?

To efficiently allocate resources and maximize profit by targeting specific groups of consumers.

One product, multiple market segments

one to all; harry potter books; finding dory movie; frosted flakes cearl

Multiple products, multiple market segmnets

Ford pickup trucks and ford suv’s; gap’s banana republic

Segments of one

A marketing approach where products are customized for individual consumers, often resulting in highly personalized goods; mass consumption; nike shoes; mini cooper cars

Cannibalization in sales

When a new product takes sales away from an existing product within the same brand, rather than attracting new customers.

Segmentation Variables

Demographic, Geographic, Psychographic, Behavioristic factors used to divide a market into distinct groups based on shared characteristics.

Geographic segmentation

Dividing the market based on geographic criteria such as region, climate, or population density; getting a family mmeber same-day delivery  for medication if they live in phoenix compared to a member who lives in south dakota which wouldnt be possible

Psychographic segmentation variables within a consumer

Segmentation based on consumer personality traits, values, attitudes, interests, or lifestyles; do customers only buy items on sale or with coupons

Psychographic segmentation further description

Focuses on psychological, sociological, and anthropological factors to construct market segments

• lifestyle groups: patterns of daily life and consumption

• activities, interests, opinions (AIOs): leisure activities, hobbies, social preferences

• values and beliefs: personal principles and worldviews

• personality traits: materilalism, innovation adoption, and other individual differences

Commonly used variables for segmentation example:

Harvard placing their magazine in whole foods lane to target a higher education customer or Nike advertising in gyms to reach fitness enthusiasts; even when other segmentation strategies are used, demographic characteristics must be known in order to assess size of target market to reach it effectiveky

Behavioral segmentation

Dividing consumers based on their behavior, including purchase patterns, usage: loyalty programs, timing of their purchases or brand interactions

Behavioral segmentation example

individuals who live in san diego and fly every week to dallas for work; customers who frequently purchase airline tickets for business travel.

Psychographic segmentation example

selling a toyota prius to environmentally conscious consumers who prioritize sustainability; someone who actually needs a car that aligns with their values and lifestyle choices.

Why is it important to have the right amount of segmentation?

Finer and finer segmentation schemes allow for richer description of the target consumer group + makes it easier to develop products/services; too much segmentation may lead to segments that may be too small to be profitably attractive

Disposable diapers market

Market segment targeted towards new parents, as exemplified by Pampers' successful branding and plus they partner with hospitals to get loyal customers by providing them with a high quality product; luvs targets parents with multiple children: more economic product that does the job for less money

Evaluating market segments

The process of analyzing different segments to determine the most viable target markets; taking a big groups of people and using variables to break up the group into different segments and decide which one you want to target based on factors such as demographics, behavior, and preferences.

Segment Size and Growth

Analyze current sales, growth rates and expected profitability for various segments

Segment structural attractiveness

consider effects of: competitors, availability of substitute products and, the power of buyers and supplies

Company objectives and resources

are needed to succeed in the specific segment(s); looks for potential competitive advantages

Evaluating Market Segments points

• have members with similar product needs/wants who are different from members from other segments

• be measurable in size and purchasing power

• be large enough to be profitable

• be reachable by marketing communications

• have needs the marketer can adequately serve

Target market process

The strategy of identifying a specific group of consumers to focus marketing efforts on; segmentation>targeting>positioning

Positioning definition

The process of establishing a brand or product in the minds of consumers, making it distinct from competitors; is it compelling in a way that it matters to the consumer and resonates with their needs and preferences leading them to be interested in purchasing

Positioning examplee

Toothpaste:

colgate total: fight full range of oral health problems

crest: powerful fluoride cavity fighter

oral-b: high quality, dentist approved

—

pepsi: blue, youth, new, future

coke: red, nostalgia, americana, classic, tradition

Head-to-head strategy

A competitive approach where brands compete directly on similar market characteristics by making their brand UNIQUE in a way that matters to the customers; example: TJ’s: don’t carry outside brands, employee-customer interaction, dont have any sales

Potential Competitive Advantages

Product differentiation :features, performance, style & design

Services differentiation: delivery, installation, repair services, customer training services (apple teaching how to use their devices)

Image: symbols, atmospheres, events

Personnel: hiring, training,

Shifting a position

is the process of changing how a brand or product is perceived in relation to competitors, often in response to market dynamics or consumer preferences; chocolate milk targeting children and shifting to target health-conscious adults.

Financial Services Examples:

Staying at a hotel, going to disneyland, taking a flight

Services

Elements consist of: intangibility, inseparability, inconsistency, inventory (there is none)

Services - Intangible

Can’t touch it, hold it; no change of ownership; surgeries, movies, digital communication services

Services - Inseparability

(can’t separate services from those who “create/manufacture the service“) - delivered and consumed at the same time; customers must be present at the consumption of the service and cannot take the service home; attending a concert; doctor’s visit

Services - Inconsistency

Customers expect a consistent experience regardless of how they interact with a company; difficult to standardize; receiving excellent service via phone but poor experience through online chat or email.

Services - NO Inventory

Unused service capacity from one time period cannot be stored fro future use; related to the hotel stay; change the price if there’s no inventory» sell concerts for half the price

Search Attributes (features)

customers can readily evaluate prior to purchase; size, price, television picture quality

Experience Attributes

Can’t figure out ahead of time and only after purchase; haircut, flight, meal in restaurant

Credence Attributes

Characteristics that consumers find difficult to evaluate even after consumption, such as the quality of a medical procedure or expert services; service providers need to work on establishing trust with their clients; therapy, medical diagnosis, legal services; more likely to rely on trust, reputation, and recommendations from those we respect

Durable Goods

Furniture, electronic devices

Non-durable Goods

Food / drinks, gasoline

Product

Good, service, tangible products

Product Classification: Convenience Products

Products you buy at the grocery store such as toothpaste

Product Classification: Shopping Products

Computer, mattress

Product Classification: Specialty products

Rolex, bentley

Product Classification: Unsought Products

Products we need but don’t think about as often: life insurance, fire extinguisher

Product - Item

A specific products within a unique brand, size, or prize; Individuality; iPad

Product - Line

Similar products that are offered by a brand or company; All types of available iPads

Product - Mix

All product lines a company has; iPad, iPhone, airpods, macbook

Innovation

An association of tech within innovation but it doesnt have to be high tech to be innovative

Innovation - Continuous

How much consumer learning is needed - no learning has to happen; gain consumer awareness by advising bigger cheeseitz; new and improved shaver, detergent

Innovation - Dynamically Continuous

Disrupts consumer’s normal routine but does not require new learning; Electrical toothbrushes; different manual compared to traditional toothbrush; smartphones

Innovation - Discontinuous

Requires new learning and consumption patterns by consumers; Discontinuous from what was previously available to the consumer; wireless router, electric car

What causes product failures?

A red sea of competition; mismatches with the consumer; wrong target market; not figuring out the consumer’s needs; being comfortable and not needing to create or change the product if you are the market leader

Growth stage in the product life cycle

the product is accepted and sales rapidly increase, competitors increase

Maturity stage in product life cycle

Sales peak, profit margins narrow; the stage where a product's sales growth slows or levels off, requiring strategies to maintain market share; may last 100 years, more or less; maintain this stage by staying loyal to company and the product

Decline stage of the product life cycle

sales decrease as customer needs change

What are the goals of promotion?

Making a sale is not always a goal; its mostly making awareness, intriguing people and gaining interest in the product

Brand

Consists of plenty of brand elements, building an emotional connection with customers; name, logo, colors

Brand Elements

Higher quality = higher equity; equity is important: brand name awareness, perceived brand quality, brand associations, the loyalty of a consumer choosing tylenol over cvs brand; a brand that is universally understood, both inside and outside the company, creates value for the organization that cannot be overestimated. you cant control what others think, but you can inspire them to believe in what you are doing

Brand Hierarchy - Individual

Multibranding = multiple products

separate brands for each product or product line

tide, cheer, bold, pampers, crest are all brands of proctor and gamble

chevrolet, buick and cadillac are all brands of general motors

allows company to serve multiple segments without diluting the image of the brands

Brand Hierarchy - Umbrella

Multiproduct branding = multiple products under the same brand

heins: ketchup, mustard, sauces

costco: kirkland signature

leverages equity of existing brand, instant recognition, avoid costs of building new brand

Product repositioning

change essential aspect of the product, often to increase relevance

Brand extension

strategy of using established brand in different context

starbucks coffee - starbucks ice cream

dyson vacuum - dyson fans, dyson hairdryers/stylers

risks can result in diluting the meaning of the brand, confusing customers

Importance of pricing

Pricing significantly influences consumer perceptions of quality and affects overall profitability; holds psychological impact on customer: we think low price = worse quality; understanding deman

Elastic Demand

a change in price causes great (opposite) change in quantity demanded

Higher change; if there is more substitute products; air travel: driving to destination instead of flying

Inelastic Demand

a change in price results in a little or no change in quantity demanded

electricity bill

Variable costs

expenses that fluctuate in direct proportion to the output volume of units produced

• costs of raw materials, credit card fees, piece rate labor, sales commissions, delivery expenses

Fixed Costs

expenses that do not vary as a function of output volume (even if no production activity, these remain)

• rent, mortgage payment, insurance, salary of full-time workers

Break-even analysis

A calculation to determine the number of units that must be sold to cover costs; 1.1»2, 1.7»2, 3.8»4 always round up to the next full number regardless if its above .5

Contribution Margin

Total revenue - total variable costs

Contribution Unit Margin

Price - Variable Costs

Assessing Price vs Value

Taking into consideration: all covered costs, competing products, consumer; tutors: estimate the costs based on what SD location they’re tutoring in

cost based pricing

calculate price based on company’s costs; markup can be states as percentage of cost of making the product or a percentage of selling price

competitive based pricing example

benchmarking on competitor’s prices

Demand-based pricing

Adjusting prices according to consumer demand; higher demand leads to higher prices; less demand, lower price; lyfts, hotels, airlines, rental cars, seasonal goods

Psychological pricing

Setting prices that have a psychological impact on consumers, such as ending prices with .99.

Anchor and Adjustment

Vons: original - 4.99; club price 2/7.00

Endowment Effect

• money back guarantee

• free trial period

• creating ownership

• customers feel as if they’re purchasing a product that will increase in value

Imagine you receive a free coffee mug with a company logo. You might value that mug more than a similar mug you could buy in a store, simply because you own it. 

Types of Illegal Pricing

Loss-leader, predatory, bait and switch, false former price comparisons

Cost plus

What i want to have over my costs

Demand: Captive Pricing

For the product to work well, you need to pair it with a different thing

Competitive Pricing: Predatory

Not good, illegal; decreasing the price for an item knowing competitor cant decrease their price; intent is to drag the competitor out of business

Dynamic Pricing

Price is changing, can change with time; based on various external factors, including current market demand, the season, supply changes and price bounding

Bringing a new product into the market

Skimming: pricing your product high initially and through time groping it; skimming off the people who are willing to purchase your product; getting a narrow piece of the pie initially

Penetration: pricing low; charging high to get a bigger piece of the pie

Price Lining

offers multiple versions of related products at different price points

filet mignon: 50 (no dollar sign to show the value)

chilis: classic sirloin: $16.99

Loss - leader pricing: Costco hasn't changed their rotisserie chicken prices in forever, they remain being $4, they don’t care about that loss since it attracts other customers to purchase other items; anchor and adjust downward

Marketing Perspectives: Place

How the product is taken from the comapny to the consumer: retailing

The 4 C’s

Customer solution; customer cost; convenience; communication

consumers see themselves as buying value or solutions< good marketers see this perspective

The marketing environment

economic forces, political forces, legal and regulatory forces, technological forces, socio-cultural forces, competitive forces

this …. is dynamic and unlike marketing-mix variables, an organization has no control over these forces

Value

customer benefits - customer costs

Direct marketing/channel and its adv and disadv

Promotional activities that involve communicating directly with the consumer to elicit a response; company to customer; disadvantages: access to limited customers than if the retailers where to be target

Direct channel advantages and disadvanatges

access to customer data, possibly greater cost efficiency in long run, greater control over environment in which offering is delivered, closer contact with end user, easier to build relationships

takes time to establish, difficult to establish same breadth as you would with multiple intermediaries, manufacturers may not have these competencies, large up-front fixed cost, customer acquisition is costly

Farmer Channel

Direct: grow apples, set up stand and directly sell to customers; farmer’s farket are not formerly direct; as a farmer you want to sell to wholesaler who then they will sell to different retailers such as a variety of grocery stores

Hybrid Channel

Direct and Indirect: can shop both online and in-store; Apple: offer their own products at their own store while also finding them at other retail stores such as best buy and target

Indirect Marketing

Wide reach is the trade-off; no direct communication; you don't know how your product will look like to the customer when they approach it at a retail store; loss of control over environment and brand associations

indirect channel / marketing adv and dis

rapid distribution can be implemented quickly, broad coverage to reach all customers

complex and maybe not as efficient?

loss of control over selling environment and over brand associations

diminished ability to communicate with end consumer

Intermediaries (negotiator)

Between distributor and retailer; creating the product but not as good as contacting the customer; match supply from manufacturer to demand from consumers; trade-off for manufacturer is loss of control versus greater market coverage

• supply chain: all activities necessary to turn raw materials into a good or service and hand it to the consumer

What are the benefits of intermediaries?

• producers make narrow assortments of products in large quantities, while consumers want broad assortments of products in small quantities

• greater efficiency in making goods available to target markets

• matching supply from producers to demand from consumers

Value Chains

• efficiently getting the product

• in good condition to where

• it is convenient for the consumer to buy it

• in a setting that is consistent with the brand’s image

• Change from the creation of the product to the customer and each step increases the value of the product

• How can we efficiently get the product while it's still in great shape to a place where a customer can buy it

• In a setting that is consistent with the brand’s image

• The brands right to ok how their product is distributed

• If your values align with mine, i want a contract with you whereas there is another retailer whose values dont align with yoursThe brands determine how their product is being distributed because they want to demonstrate the value;

Forward vertical integration

• Manufacturer and retailer and then consumer (forward)

• Start manufacturing and distribute through retailers and do the retailer yourself; take control towards that step with the consumer

• Owning manufacturers and own retail shops

  • Manufacturer owns a retailer shop

Backward Vertical Integration

• Consumer and retailer and manufacturer

• Retailer serving the consumer

• Retailer owning a manufacturer

• Netflix: producing their own movies 

• Tiffany and co

Target Market Coverage Decisions

• Each coverage maps with a type of product

  • Intensive: so many locations

  • Exclusive: very few outlets

    • BMW’s, fendi handbags

  • selective: somewhere between the other two

    • selective fewer locations

    • shopping products: iPods, tv’s, dvd players, shoes

Self service

customers perform any functions during the purchase process; most non-essential customer services are eliminated; costco, amazon-go, some grocery stores