SEGMENTATION, TARGETING, AND POSITIONING - BUAD 307

1

SEGMENTATION, TARGETING, AND POSITIONING

• Segmentation• Product positioning• strategy• Bases for

segmentation• Positioning• Targeting• Repositioning

Segmentation, targeting, and positioning together comprise a three stage process. We first (1) determine which kinds of customers exist, then (2) select which ones we are best off trying to serve and, finally, (3) implement our segmentation by optimizing our products/services for that segment and communicating that we have made the choice to distinguish ourselves that way.

BUAD 307 SEGMENTATION, TARGETING, AND POSITIONING Lars Perner, Instructor 2

Text, Exhibit 9.1: The Segmentation, Targeting, and Positioning Process

Establish strategy or objectives

Use segmentation

methods

Evaluate segment

attractiveness

Select target market

Identify and develop

positioning strategy

SEGMENTATION TARGETING POSITIONING

This chart from the text shows the sequence of steps in the segmentation, targeting, and positioning (STP) process.

2



TARGETINGSELECTING WHICH

SEGMENT(S) TOSERVE

POSITIONINGIMPLEMENTING

CHOSEN IMAGE ANDAPPEAL TO CHOSEN

SEGMENT

SEGMENTATIONIDENTIFYING

MEANINGFULLYDIFFERENT GROUPS

OF CUSTOMERS PROUDCT

DISTRIBUTION

PRICE

PROMOTION

Segmentation, targeting, and positioning (STP) involves steps in (1) identifying the types of customers that exist and how these differ from each other, (2) selecting the ones most appropriate for the firm to serve, or “target,” and (3) implementing this targeting decision through positioning. Here, we can use each of the four Ps in the marketing mix to create our position. We will discuss this latter step later.

3


LEARNING OBJECTIVES

• Identify

– Different unique needs and expectations of different customer groups

– Tradeoffs among strategies of serving different segments

– Methods for selecting and targeting customer groups

– Bases for implementing target selection through positioning

The STP process is a fundamental aspect of marketing. We will focus on addressing the issues above.

4

5


DEFINITIONS

Segmentation:

“Aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.”

“The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.”

Although not all these consumers are completely alike, they share relatively similar needs and wants.

Marketing action involves: efforts, resources, and decisions--product, distribution, promotion, and price.

One can think about the idea of segmentation in different ways.

The first definition emphasizes the pragmatics of selecting customers who have similar needs and respond similarly to marketing action. That is, in some product categories, some customers will tend to be quite brand loyal while others will frequently switch brands, whether for the sake of variety or to take advantage of sales and other promotions. There is little benefit in offering a coupon or other discount to a brand loyal segment. It would not make sense to target a price discount or other promotion to this segment. Those who are not loyal customers for our brand would not switch, and those who already buy our brand now get a discount not needed to secure their purchases. Therefore, there would be no incremental sale.

The second definition involves issue of selecting segments that we can work with in practice. The differences in segments should be actionable in the sense that one can provide different value to each group, or choose to focus on one of the segments that one can serve well. Members of each segment should be relatively similar to each other so that they will respond similarly to the offerings made. Segments should be identifiable, or reachable, so that we can actually communicate in offering our value proposition.

6


SEGMENTS--EXAMPLES (1)

Air Travel Business/Executive: Inflexible;

relatively price insensitive (Small number of people, but travel often)

Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment)

Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)

Airlines rely on the strategy of blended yield to make their flights cost effective.

Business travelers—even if they actually fly in economy class—tend to be less price sensitive than leisure travelers. They have to pay the cost involved in meeting with their actual and potential customers. They often do not know much in advance when they will need to fly. Thus, they will generally have to pay higher prices when booking with short notice. There are, however, only a limited number of these travelers, and they will need to travel at a particular time. Thus, we can only fill up part of the plane with these customers.

Leisure travelers are often much more price sensitive. If people travel for vacation, they will usually need to arrange some time in advance, so they can buy tickets earlier. They may also be willing to change the time at which they go if there are large differences in fares at two different times. Although these customers will pay much less, there is a larger quantity.

Some “comfort” travelers may be willing to pay a large premium to travel in first class, in extreme cases, for having access to a shower during the flight. These customers are few and far between, but can offer a great deal of revenue.


SPECIFYING SEGMENTS

• Variables involve descriptors such as age, gender, income, price sensitivity, brand loyalty, geographic location, usage rate, and involvement

• Levels involve the different categories within each variable. For example, for age, levels might be 0-20, 21-30, 31-40, 41-55, 56-65, and 66; for geographic location, Northeast, Southeast, Midwest, Southwest, West or urban, rural.

• Segments are obtained by “crossing” the combinations—e.g., crossing usage rate (high, medium, low) with brand loyalty (high, medium, low) gives nine combinations (e.g., low usage, low loyalty; medium usage, low loyalty; high usage, medium loyalty).

Segments are specified in terms of variables (e.g., age, gender, income, brand loyalty, or usage rate). Each variable will, in turn, have two or more levels, or values that the variable can take on. For example, geographic location could take the values of urban, suburban, or rural; usage rate could be high, medium, or low).

Note that segmentation calls for some tough choices. There may be a large number of variables that can be used to differentiate consumers of a given product category; yet, in practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus, we need to determine which variables will be most useful in distinguishing different groups of consumers. We might thus decide, for example, that the variables that are most relevant in separating different kinds of soft drink consumers are (1) preference for taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand names; and (4) heavy vs. light consumers. We now put these variables together to arrive at various combinations.

7


SOME BASES FOR SEGMENTATION

Geographic (technically part of demographics)

Demographic

Psychographic

Benefit Desired

Behavioral Loyalty

Scanner data based approaches

A number of variables can be used for segmentation. These, in turn, can be grouped into various categories. We will examine each in turn.

Several different kinds of variables can be used for segmentation. Demographic variables essentially refer to personal statistics such as income, gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size. Campbell’s soup, for instance, has found that Western U.S. consumers on the average prefer spicier soups—thus, you get a different product in the same cans at the East and West coasts. Facing flat sales of guns in the traditional male dominated market, a manufacturer came out with the Lady Remington, a more compact, handier gun more attractive to women. Taking this a step farther, it is also possible to segment on lifestyle and values.” Some consumers want to be seen as similar to others, while a different segment wants to stand apart from the crowd. Another basis for segmentation is behavior. Some consumers are “brand loyal”—i.e., they tend to stick with their preferred brands even when a competing one is on sale. Some consumers are “heavy” users while others are “light” users. For example, research conducted by the wine industry shows that some 80% of the product is consumed by 20% of the consumers—presumably a rather intoxicated group. One can also segment on benefits sought, essentially bypassing demographic explanatory variables. Some consumers, for example, like scented soap (a segment likely to be attracted to brands such as Irish Spring), while others prefer the “clean” feeling of unscented soap (the “Ivory” segment). Some consumers use toothpaste primarily to promote oral health, while another segment is more interested in breath freshening.

8


GEOGRAPHIC (technically a case of demographic segmentation)

Regional differences Climate and physical environment

Tastes

Campbell’s Soup

Lifestyle and values

Urban vs. rural areas

Micro-segmentation Adaptation of retail store assortment to the

specific area based on:

Residential demographics

Other characteristics (e.g., vicinity of a beach)

May be largely data-driven based on past sales (scanner data)

Geography is, strictly speaking, part of demographics, but since the text breaks this out as a group, we will consider some specific examples.

Residents of different areas will experience difference climates and other conditions affecting their lifestyle options challenges faced. In some areas, for example, whether may bring both work and certain leisure activities to a stop, often on short notice. There are also, on the average, differences in tastes across regions. McDonald’s offers certain different items in different regions. For example, fried chicken breakfast sandwiches are offered mostly in the South. Although this fact is not advertised, Campbell’s will ship spicier versions of their soups to the West than to the East ad Midwest. Language use may differ by region. The same product, for example, is variously known as “pop,” “soft drinks,” “soda,” or even “Coke” in different regions. In the latter case, when ordering, a customer may be asked “What kind of Coke?” and may answer “Sprite.”

Customers in urban and rural areas have very different experiences. In the rural area, restaurant choices may be much more limited. Although more specialized shopping may be possible in urban areas, traffic congestion may actually making shopping a more onerous task.

Micro-segmentation involves attempts by a large chain store such as Target to tailor the assortment of each store location to the needs of the area. These efforts may be based on demographics such as age distribution, ethnicity, and income levels, whether an area is primarily residential or business, and whether the surrounding area is a vacation destination.

9


DEMOGRAPHICS

Age

Gender

Income—not generally a reliable predictor (willingness to spend is more useful) Income ≠ willingness to

spend!

Ethnicity

Family lifecycle stage

Demographics essentially refers to statistical characteristics that an individual or a household can take on. This might include age, gender, or ethnicity.

Generally, income is not a reliable predictor of spending. Although it is necessary to have a certain income (or wealth) to be able to buy certain things, having that income does not guarantee that it will be spent. Some low income individuals live greatly above their means (foregoing saving for retirement and their children’s education and possibly running up considerable debt). Many individuals with high income are quite frugal. Thus, although this is, strictly speaking, not a demographic factor per se, it makes more sense to segment based on price sensitivity.

Family lifecycle stage is often a strong predictor of needs and ability to spend. An individual starts out as single. Once in the workforce, the individual may have limited income, but because he or she often has not built up obligations such as children and a mortgage, they may be better able to afford certain luxuries than older individuals who have higher income but greater obligations. Divorce can have a dramatic financial impact and may greatly increase expenses as living quarters and duplicate items are needed. Once a child is born, this will increase expenses but, at the same time, also decrease income if one spouse cuts back on work or leaves the workforce entirely. “Empty nesters” who often have reached higher pay levels may find more resources left over when children have left the household. Once a home mortgage has been paid off, available income may increase. The financial shape of retirees tends to vary dramatically. Many are quite well off, but others who are relying only on Social Security and modest savings or retirement plans may have little to spend.

10


INCOME AND PRICE SENSITIVITY

• Income and wealth are NOT reliable predictors of price sensitivity.

• In order to be able to buy certain high priced items, a certain level of income or wealth is a necessary, but not sufficient, condition.

• A book titled The Millionaire Next Door provides strong evidence that many wealthy people have developed wealth through frugality rather than high incomes.

• Wealthier individuals will NOT necessarily choose higher priced options.

• Therefore, segmenting on price sensitivity rather than income or wealth makes more sense.

Important distinction!

An interesting book titled The Millionaire Next Door suggests that lifestyle choices greatly affect wealth and savings. Some people with modest incomes manage to build up significant wealth while many with higher incomes spend more freely and fail save much if anything.

It should be noted that an individual may spend more freely in certain product categories (e.g., microbrew beer) while being more frugal in other categories. The text describes this phenomenon as component lifestyles.

11


SOME DEMOGRAPHIC TARGETS

• The George Foreman Grill—infomercial initially featured footage of his boxing career, which was not of interest to much of his target market (women). Instead, a subsequent version featured pictures with his family.

• “Free Style Cruising” at Norwegian Cruise Lines: Do what you want when you want. Cruises had historically been more regimented, and catered in large part to “the newly wed and the nearly dead”—honeymooning couples and senior citizens. In attempting to appeal to families, the experience was made more flexible.

The George Foreman Grill is today quite popular and is sold both in retail stores and through infomercials. Originally, the infomercials were quite unsuccessful because they started out showing footage from George Foreman’s boxing career. This was not of interest to most women, who were the primarily buyers of the program. The commercials were, instead, changed to focus more on the use of the grills and Foreman’s affable personality.

Norwegian Cruise Lines invented the idea of “free style cruising.” Historically, cruises attracted mainly from the “nearly dead” (older, retired couples) and “newly wed” (honeymooners). The regimented style of traditional cruises, where dinner was served at a fixed time and activities less family friendly, there was little interest from families. Free style cruising, in contrast, allowed customers to “do what you want when you want.” Meals were available during mornings, days, and evenings, and families could choose from any number of activities ongoing at any time.

12


PSYCHOGRAPHICS: A combination of demographics and lifestyle

Motives

Values

Lifestyle Usually more practical than

personality

Psychographics involves a combination of demographics and lifestyles. Two men may be nearly identical demographically, for example—both 41 years old, both married with two children, both having incomes of $81,000, and both being Presbyterian—but having very different lifestyles: One is physically active, adventurous, and willing to try new things while the other is more sedentary and less willing to change existing habits.

Different consumers may hold different values and may need different appeals. Some, for example, like to be seen as being similar to others while others want to stand out.

13


BEHAVIOR: Habits, choices, and tendencies

• Some examples:– Usage rate

– Brand switching

• Brand switchers—variety seeking

• Brand switchers—motivated by price

• Loyals—extreme temptation is needed to bring about switch

• Inertials

– Habitual buyers

– “If it ain’t broke…”

– Likely switch if there is a good reason

• Other scanner data based methods

Segmentation by behavior involves variables such as usage rate/frequency, willingness to switch brands (whether to save money or for variety), shopping outlet choice (e.g., supermarket, convenience store), and media habits. Scanner data can identify behaviors such as brand switching, store choice, and media habits.

14


Cracking Down on Excess Retail Store Returns

• Best Buy and a number of other retail chains engage the services of Retail Equation, a service tracking return patterns of customers

• Certain customers who have made “excessive” returns are told that they will no longer be able to return items for a certain period of time even if this would generally be permitted under the retailer’s return rules

• These restrictions are intended to:

– Curtail abuse (e.g., wearing clothes or using a product and then returning it)

– Guard against stolen items or items bought elsewhere being “returned”

– Guard against excessively costly customers (an estimated 11% of retail store merchandise is being returned)

A small percentage of retail customers often account for a large percentage of the returns. Some people simply decide that they do not like what they bought and take it back. In order cases, people have been known to buy outfits to wear for an event and then return it afterward. These customers can be expensive, so a number of retailers have taken to “banning” customers who return excessively or at least deny them further return privileges. One cell phone service provider also “banished” customers who make unusually large numbers of calls to customer service.

15


Predicting Pregnancy from Target Purchases

• Twenty-five variables used to predict—e.g.,– Change to unscented lotions and cotton balls

– Dramatic increase in purchases of

• Hand sanitizers

• Selected vitamins

• Wash cloths

• Cotton balls

• Legal issues

• Ethical and public relations issues

Target is reported to use twenty-five variables to predict customer states and situations. Certain purchases, for example, when taken together tend to predict a likely pregnancy. This practice is rather controversial due to the privacy issues involved.

16


USAGE RATE

“80/20” rule—20% of consumers may account for 80% of consumption (in many product categories) Note that larger consumption rate

segments may be subject to heavy competition

Reasons for targeting smaller segments Reduced competition Opportunity for growth

The well known “80/20” rule suggests that 80% of a firm’s business may come from 20% of the customers. Heavy users of a product will buy more, but segments of these may attract more competition. A smaller firm may want to target a smaller segment, especially if that is one that is growing.

17


DYNAMIC PRICING

• The effective price may be set based on the past behavior of the customer

– Customers who have not shopped at Staples or Staples.com recently may receive a coupon

– Amazon.com may base the price offered on previous purchases. New customers may receive lower price offers.

– Those who elect to pay for airline upgrades (e.g., to first class) may be less likely to get such upgrades as comps

Dynamic pricing involves adjusting a price based on previous behaviors of a customer. For example, a customer who has not made a purchase recently from an online merchant may receive a coupon.

18

19

Segmentation on benefits sought involves identifying different groups of customers looking for various types of products—e.g., “exotic” vs. “safe” foods.

In some cases, it may not be clear what, if any, demographics may correlate with various tastes, but there are clearly customers who prefer each of several ones.

Targeting customers under this basis may be less efficient because it may not be possible to identify “efficient” media where a large proportion of viewers, readers, or listeners has a specific preference here.


BENEFITS SOUGHT

Based on Differences in arbitrary

tastes—a matter of preference rather than significant tradeoffs (e.g., cola vs. non-cola drink)

Tradeoffs (e.g., taste vs. calories; price vs. performance)

Usage situation (e.g., coffee for camping (instant) vs. higher quality for home brewing)

20


TARGETING: SELECTING SEGMENT(S) AND SPECIALIZING

“You can’t be all things to all people” ---> choose one or more groups.

Focus narrows scope of competition, but demands are greater.

In general, it holds true that “You can’t be all things to all people,” and experience has demonstrated that firms that specialize in meeting the needs of one group of consumers over another tend to be more profitable.

In this phase, we decide to target one or more segments. Our choice should generally depend on several factors. First, how well are existing segments served by other manufacturers? It will be more difficult to appeal to a segment that is already well served than to one whose needs are not currently being served well. Secondly, how large is the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly growing segment is that it tends to attract competition). Thirdly, do we have strengths as a company that will help us appeal particularly to one group of consumers? Firms may already have an established reputation. While McDonald’s has a great reputation for fast, consistent quality, family friendly food, it would be difficult to convince consumers that McDonald’s now offers gourmet food. Thus, McDonald’s would probably be better off targeting families in search of consistent quality food in nice, clean restaurants.


SOME CRITERIA IN EVALUATING SEGMENT ATTRACTIVENESS

• Identifiability (and distinctiveness from other segments)

• Reachability

• Substantiality (segment size)—note that a large segment may attract heavy competition, however.

• Profitability

• Responsiveness

A number of criteria can be used to evaluate the attractiveness of different segments. These are discussed further in the text.

21


APPROACHES TO TARGETING

• Undifferentiated: Offering sold as a commodity by everyone to call customers

• Differentiated: Firm makes different offerings to each of several different segments (e.g., auto manufacturers make different cars and trucks aimed at different customer groups)

• Concentrated: Firm focuses on serving one segment (or offering one benefit)—e.g., Tesla (electric cars)

• Micro-marketing (one-to-one): Unique offerings to each customer

Generically, there are three approaches to marketing. In the undifferentiated strategy, all consumers are treated as the same, with firms not making any specific efforts to satisfy particular groups. This may work when the product is a standard one where one competitor really can’t offer much that another one can’t. Usually, this is the case only for commodities. In the concentratedstrategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors. For example, Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices. In contrast, most airlines follow the differentiated strategy: They offer high priced tickets to those who are inflexible in that they cannot tell in advance when they need to fly and find it impractical to stay over a Saturday. These travelers—usually business travelers—pay high fares but can only fill the planes up partially. The same airlines then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over.

22


Identifiability and Reachability

• Members of a segment need to be identified either individually or as a group with characteristics and to be reachable (i.e., targeted with advertising and reached with stores or other sales outlets)

• Lists of very specific segments—to whom catalogs and other materials can be sent—can be bought from brokers. Examples of lists available:

– Occupation (especially if licensed or listed in Yellow pages)

– Organizational membership

– Medical condition

• Reach through specialized media

Identifiability refers to the extent to which it is possible to separate individuals who belong to a segment from those who do not. Is there, for example, an effective method to determine which consumers are likely to stock up on items that are on sale (known as “purchase acceleration”) from those who do not? In this case, we may be able use scanner data.

Reachability refers to the extent that there is a cost effective way to communicate with the segment members in question. For segments based on demographics, TV networks will usually produce elaborate data on the distribution of demographics who watch a particular program. In other cases, reachability may be more problematic. A firm once wanted to reach taxi drivers. Since many people who drive taxis do so for only short periods of time, one cannot rely on lists. An attempt was made to advertise in newspapers, given that taxi drivers were often seen before most papers were read online to read newspapers in between rides as they were waiting for new fares. This was clearly not efficient since only a very small fraction of those reading the newspapers were actually taxi drivers—the firm spent a great deal of money on advertising that mostly reached people for whom the product was not relevant. This method also turned out to be ineffective in that very few taxi drivers responded.

23


Reaching Target Markets

• TV network viewer demographics, lifestyles, and interests

– Food network vs. ESPN vs. Bloomberg

• Retail store level scanner data—e.g., drug store chain predicting pregnancy

• Direct mail lists– Previous purchases

– Auto and real estate ownership

– Medical conditions

– Profession organization membership

– Warranty registrations

– Area of residence

– Estimated income

– Other demographics

• Specialty media– Specialized TV programs addressing

product of interest (e.g., food, travel)

– Print or online specialty magazines (e.g., digital photography, home improvement, jogging, travel, hunting)

• Search behavior– Paid search—”pay per click”

– Products explored online

– Sites frequented

Data enhancement: Matching individuals across sources to combine comprehensive information—multiple variables

There are a number of ways to most efficiently reach more specialized target markets (rather than aiming all advertising at the general population:• TV networks carrying specialized programming of interest to particular types of customers

(whether the this programming expressly covers the types of products advertised or are more generally predictive of interests). For example, the Food Network attracts different types of

• Use of retail store level scanner data. Certain purchase patterns predict certain interests or statuses. Target is reported to use twenty-five variables to predict pregnancy (change to unscented lotions, increase in vitamin purchases, increase in purchases of hand sanitizers, wash cloths, and cotton balls)

• Direct mail lists. A number of vendors sell lists (i.e., names and mailing addresses) of individuals with various characteristics. Among variables used are:

• Magazine subscriptions• Purchases from other online merchants• Motor vehicle and real estate titles• Ownership of products based on warranty registration• Membership in associations• Government licensure (e.g., veterinarians, dentists, attorneys)• Yellow page listings• Medical conditions• Having recently moved

24


Direct Mail Catalogs

• Still used– Spam e-mail is technically illegal and viewed unfavorably

– Catalogs get more attention

– More elegant and higher resolution images

• The “Merge-Purge” process: Combining different sources– Available sources include magazine subscription lists, competitors’ customers (more

catalogs are believed to increase the “pie” size rather allowing competitors to take away)

– No one source contains all potential customers; thus, sources are added together (merge)

– There will likely be some overlap between sources, so duplicates must be removed (purge)

• Limited response rates– Typically 1-3% when highly relevant sources are used (e.g., past purchase)

– Merely sending to everyone in the phone book would result in a much lower rate!

– The 1-3% response rate is considerably greater than response to TV, newspaper, and magazine advertising

Any one individual source is unlikely to contain all the names of potential buyers for a given criterion. Therefore, direct mailers will often buy numerous different lists (the “merge” process). These lists, however, overlap a great deal. It is likely, for example, that many surfing enthusiasts will subscribe to several magazines, be members of at least one organization, and shop from one or more merchants. Therefore, there will be a number of duplicates. In the “purge” process, these duplicates are removed. This, however, is not as easy as it may sound since the way that names (e.g., John Jones and J. E. Jones) and addresses(e.g., 123 Main Street #45; 123-45 Main Street; 123 Main St., Apt 45) are written may differ between lists. Therefore, lists are first standardized to a chosen format. In addition, given that many names are often misspelled, phonetic comparisons are often used.

25


Merge-Purge: Identifying Potential Buyers of Baby Clothes

NON-REDUNDANT FINAL LIST

NAMES AND ADDRESSES FROM

ALL SOURCES COMBINED

AMERICAN BABY

PARENTING

NEW PARENT

BABY & TODDLER

GYMBOREE.COM

CARTER’S

OSHKOSH.COM

REMOVE DUPLICATES

SPOLING GRANDMAS’

ASSOCIATION

COOL DADS’ SOCIETY

MOMS CLUBBONPOINT

BABY CLOTHES

KOREAN-AMERICAN FAMILY CENTERS

ACTIVE BABY DEPOT

The Merge-Purge Process. When no single source contains all the customers of interest, it is possible to combine different lists and remove the duplicates. For example, buyers of baby clothing may have bought from several different catalog and online merchants before. There is no one merchant from whom everybody has bought, but some customers may have bought from more than one. In addition, magazine subscriptions and organizational membership may predict such purchases. The merge-purge process increases the number of individuals in the database but does not necessarily add more information about each individual.

26


Clarification: Data enhancement vs. the merge-purge process

• Data enhancement– Increases the amount of information available

about each individual but not necessarily the total number of individuals in the database (individuals are matched across databases and their information is combined in a new, comprehensive one)

• Merge-purge– Increases the number of individuals in the

database but does not necessarily add more information about each individual

Two different methods are used to increase the effectiveness of available lists:

• Data enhancement: Combining information about the same customer from several different sources—e.g., real estate records, past purchases, vehicle registrations, magazine subscriptions. This increases the amount of information available about each individual but not necessarily the total number of individuals in the database (individuals are matched across databases and their information is combined in a new, comprehensive one)

• The Merge-Purge Process. When no single source contains all the customers of interest, it is possible to combine different lists and remove the duplicates. For example, buyers of baby clothing may have bought from several different catalog and online merchants before. There is no one merchant from whom everybody has bought, but some customers may have bought from more than one. In addition, magazine subscriptions and organizational membership may predict such purchases. The merge-purge process increases the number of individuals in the database but does not necessarily add more information about each individual.

27


POSITIONING:Text, Exhibit 9.8: The Value Proposition

Competitor offerings

Customer needs

and wants

Firmofferings

Value Proposition: Desired benefits for a particular customer not readily available from competitors

28


SOME POSITIONING STRATEGIES

• The value proposition—some possible benefits

– Unique product/service

– Price

• Low price as benefit

• Good value compared to competitors

– Quality

– Prestige

– Customer values (e.g., cruelty free foods and personal care items)

• Customer communication and education needed

29



POSITIONINGIMPLEMENTING

CHOSEN IMAGE ANDAPPEAL TO CHOSEN

SEGMENT

PROUDCT

PROMOTION

PRICE

DISTRIBUTION

PREMIUM

BASIC

DURABLE

PRESTIGE

FUN

POWERFUL

PREMIUM

LOW PRICE

VALUE

INTENSIVE

SELECTIVE

EXCLUSIVE

30

Documents

SEGMENTATION, TARGETING, AND POSITIONING - BUAD 307