26,For more dNNls see Expeoan UK~ Web sRe at wwme.~Terian.co.uk/pmducts/pm~cts_targ_

pmspecLhtmL

27.For more on d~a mining and ~l~ed ~p~ see Pe~r Jacobs, "D~a M~g: Wh~ Gen~

Manages Need ~ ga~w," Ham,ard Management Updat~ Oc~b~ 1999; and ~ff Papow~

Ente~rise.com: Market Leadersh~ ~ ~e h!fo~wmtion Age (Cam~ridg~ MA: Pe~eus Pub-

hs~n~ 1998).

28. In~rmation ~ ~is ~cfion com~ ~om ~e So~y of Compe~e Intelligence Professionals Web

~te at ~vmsc~.~’g/images/e~ma~#ci.hm~.

29.For more on marketing research, see any business school m~ket~g research mxt, such as Dis-

so~ Madde~ and Fi~, Mat~e~g R~earch ht a Marke~g Em,imnment (Burr Ridge, IL:

Irwii~McGraw-H~, 1993). Also see Famda L. Almck and Robea B. Sere, The &tn,<v R~earch~vc~s (Burr Ridge, IL: IrwiWMcGraw-Hi~, 1994). The survey research m~hods ~cfion of~e

American ~atistic~ A~ociat~n offers use~l guides to condu~g ~cus groups and surveys.

Dow~oada~e PDF files may be ~und ~ ~mmesmLnc~e&#it~bism~/stw~htmL

Targeting AttractiveMarket SegmentsBlue Ribbon Sports Targe~ Distance Runners

It was 1964. Phil Knight, a recent g~duate of Stan-ford~ G~duate School of Business and a formerUnwe~ity of O~gon runner with a 4:10 personalbest in the mile, and the ~genda~ Bill Bowerman,Knight~ former track coach at the Unwe~ity ofO~gon, we~ pas~onate about di~ance running.They believed that the German-made shoes thatmost competitive runners wore at the time weretoo expen~ve and not designed with distance run-ners’ needs in mind. They saw an oppo~unky todesign better running shoes in the United States,have them manufactu~d in Asia, and sell them inAmerica at prices lower than the German shoes.

The Unique Needs

of Distance Runners

Di~ance runne~ such as Knight and Bowermanhad diffe~nt footwear needs than other athletes.To become cond~oned enough to run a 26-milema~thon or even a one-mile or two-mile race atan inte~legiate track meet, di~ance runne~ ~nseveral miles per day and sometimes more than100 miles in a week. O~en, these miles we~ spenton rough trails, whe~ rocks and other natu~l ob-stacles led to ankle sp~ins and other iquries, oralong count~ roads, whe~ the miles and miles ofimpact led sometimes to shin splints or even stressfractures of the bones in their legs and ankles.Bowerman, a lifelong innovator who made shoesin his garage for his runners, believed that distance

runne~ needed lighter and more flexible shoes,not heavy leather or ~iff soles. They needed shoeswith better lateral ~ability, to protect againstankle sprains, and more cush~n~g, to help therunner~ body cope with miles and miles of repet-itive impact.

The Waffle Revolu~on

Though ~al success took several yea~ tomatedal~< the sto~ of Bowerman~ visionof a better shoe for distance runners is

now entrepreneurial Iota With his wife~ waffleiron and some latex, Bowerman invented the wa&fie ou~ole that would u~mate~ ~v~ution~e therunning shoe. The I~htweght, yet du~Me and ~a-ble sole set a new standard for shoe performancefor di~ance runners. Knighb the business personand ~onary, had wri~en in a class assignment atStanfo~ a plan for dev~o~ng a business to sellAmerican-des~ned, A~an-made shoes lo di~ancerunners. Knight and Bowerman each chipped in$500 to form Blue Ribbon Spots and found aJapanese compan~ Oni~uka Tige~ to manufadu~the shoes they designed. For yea~, whe~ver the~was running going on, Knight could be found sell-ing his shoes out of the back of his ~ation wagon.By 1969, Knight was able to quit his day job as anaccountant and devote all of his energies to thegrowing business, which had grown to 20 employ-ees and several ~tail outlets.

133

Launching and Expanding theNike Brand

In 1972, Blue Ribbon Spots launched KsNike brand at the U.S. Olympic trials aftera dispute between Blue Ribbon and Tiger

led to a b~akup of their relationsMp. In the 1972Olympic marathon, four of the top seven finishe~wore Nike shoes. By 1974, aker 10 yea~ ofdogged effo~ to build the compan~ the Nike shoew~h Bowerman% waffle sole was America~ besbselling t~ining shoe, and the Nike b~nd was on i~way to ~a~om. In 1978, tennis g~at John McEn-

roe signed with the compan~ which had changedi~ name to Nike, Inc., and tennis shoes became aprominent pa~ of the produ~ line. In 1985, apromising Chicago Bulls basketball rookie namedMichael Jonah endowed a line of Air Jo~an shoesand appall. By 1986, Nike~ worldwide salespassed the billion-d~r mark and Nike had be-come the acknowledged techn~og~al leader inthe footwear indu~ry. Befo~ long, Nike e~ended~s produ~ lines to include athletic appall.

World Cup 2002

Among Nike~ target markets by the turn of them~en~um was football--soccer to Ame~cans--the world~ most-played spot. Wkh World Cup2002 scheduled in Korea and Japan, Nike% productdev~ope~ knew that ext~me heat and humiditywould call for uniforms that would help playerscompete at top speed and ~ill keep their bodytemperatu~ down. Working for two yea~ withthe Korean team, Nike developed iB new Cool Mo-tion techn~og~ a material with a "two-layer struc-ture designed to ma~mize thermal comfo~ andventilation," said Nike% C~ative Produ~ Designerfor Football, Craig Buglass. The uniform~ innerlayer pulled perspiration away from the skin andspread it over a wide area for quick evaporation, tswater-rep~nt outer layer helped to keep the uni-form d~ under ext~me humidity during intenseaerobic adMty.

Did the uniforms perform? Ko~a, never knownas a football powe~ surprised many by winningthird place. Their relentle~ p~u~ and unendingteam speed impressed many obse~e~. And theh~hAech uniforms su~ly didn~ hu~.

STRATEGIC CHALLENGES ADDRESSED IN CHAPTER 6

The examp~ of Nike, Inc.~, ofiNns and early deve~pmem ~vN~ points out how a ~w

relative~ simp~ dedsons m deafly ~emify a markN ~gmem with unma or poorly m~

needs--~stance runn~s--and then develop innovaNe goods or services that meet the

needs of the targemd ~gme~ can provide entrde i~o a market n~he and serve as a ~un-

dation for subsequem expansion ~a can mvo~fioNze a m~kN or ~duary

Wha Phil KhaN, Bill Bow~ma~ and ~e manageme~ ~am ~ey ~mbled unde~

~ood so w~l N ~ NffemN groups of consume~--~ffem~ markN segme~s--have &~

~m~ warns and needs, bo~ ~ngible and intanDNe, ~ aNetic %~wea and ~ aN~ ap-

p~. In vKmN~ any makN, if ~ffemm ~gmems can be c~afly ~emNe~ spec~c

produas wi~ specffic maket~g programs can be dev~oped m meet b~h ~e phys~al

needs of~e consum~ ~.g., ~e lateral stabili~ and ~e extra cushioNng ~a ~stance rum

nets need ~ ~ek shoeQ as we~ as ~e em~%nN needs ~a consumes attach to ~eK pu~

sui~ ~.g., to ~ tha ~ey reign someday soar tNough ~e Nr and dunk a b~ke~N1 wi~

the panache of Michael JoNa~.In ChaN~ 6, we draw on the %unda~n of market knowledge and cu~om~ undeP

aan~ng e~aNNhed ~ the fir~ five chap~ to introduce what ae probab~ ~e mo~ im-

po~a~ and ~ndame~N runs ~ the m~kN~N toolkit: mark~ segmentation and target

marketin~ TogNh~ wi~ pmdu~ po~fioNng, wh~h we address ~ Chap~r 7, ~e~ ~Ms

pin, de ~e Na%rm on wh~h mog effe~Ne marketing programs ~e b~R. Learning m

app~ these tools effectively, however, ~quims addres~ng serum importam questions.

Cha~er Six ~e~ng A~ Manet ~gm~ 135

Why do m~kN segmem~ion and mtg~ marking make sen~? Why nm sell ~e same ~h-lefic shoes---or b~yde~ Nriine ficke~, beverages, or whateve~m everyone? How canp~entially ~a~Ne m~k~ ~gments be Nentified and defined? Finally, how can thesesegments be priorit~ed so th~ the mo~ a~racfive ones ~e pursued? Answering these que~fions shoed enaNe an entrep~neu~ a ventu~ cap~M investor in Silicon Valley, or a ma~kefing manager in a multin~nN firm to deNde which m~k~ segments should be ~ge~d and wh~h ~vestments should be made.

WHY DO MARKET SEGMENTATIONAND TARGET MARKETING MAKE SENSE?

Strategic IssueAre all ~e anNys~and con~us chNcesabo~ wNch ~gme~s ~serve ~al~ necessary?

M~t segment~n is the process by which a mark~ ~ dNided ~o ~ subse~ ofcu~om~s ~ s~fl~ needs and charac~risfics ~ ~ad them to respond ~ ~mfl~ w~s~ a ~c~ Wo~ o~g ~d ~g program. ~ ma~ ~s ~~ng ~e ~ a,racfiveness of various ~gments On mrms of m~k~ ~m~N, gro~hr~e, comp~ifive ~si~ and o~ ~o~) and ~e firm~ ~ and capab~fi~ m de-fiver ~at each ~gment wants, ~ order to choose wNch ~s R ~ serve. Productpo~ entails ~g~ng ~odu~ o~ ~d ma~ programs ~ ~c~e~es~N~h an enduring compline advantage ~ the ~rg~ maN~ by ~e~ a uNqueimag~ or poMfio~ ~ ~e cu~om~ ~nd. ~igN and Bow~man ~unded B~e ~bbonSpots ~ pa~ because ~ey saw a mark~ s~~e runners~ose needs werenot berg NI~ m~. They chose to target ~s ~gment because ruing was gmw~g inpop~ariW and because ~ey had pa~Nr knoM~ and expe~ise ~ey could bring to thepar~ They poNfioned ~dr i~Ne shoes as ~e ones th~ e~d ~e p~rman~ ofthe be~ m~e~ ~ ~e world an@ by i~~ of a~one rise who cared about Ns or

Thee t~ee dedNon ~~ ~~ ~ m~k~ and p~Nom~ are c~sdy ~d and h~e s~ong ~&~M~. AH ~ be ~H consN~ed and~~d X~ ~ is m be ~s~ ~ manaNng a gN~ pm~cbm~t ml~.No ma~er h~ NNe the ~, ~g ~s resources are usually l~ed ~d ~th the~ of a~nafi~ m~t ~gments ~aNe ~r i~L TMs, a fi~ mug ma~choices. Even ~ the u~suN case where a fi~ can a~rd to serve ~ m~k~ ~ Rmug &m~ ~e mo~ appmpfi~e aHocafion of ~s maN~ e~ a~v~ ~s. Butare N1 these ana~s and con~us chNc~ ~ ~ ~s to serve m~y ~~

Most Markets Are Heterogeneous

Because m~k~s ~e ~ homogeneous in bene~s wante~ pu~h~e rates, and price andpromotion dasticit~s, the~ response rates to produc~ and m~k~g programs Nffe~Variation among m~k~ ~gments ~ grodu~ preferences, size and growth ~ deman~mesa hab~s, and comp~Nve ~rucmms N~h~ affect ~e Nffemnces and response rates.Thu~ m~k~s are complex entNes ~at can be defined (~gmented) in a vafie~ of ways.The crificN issue is to find an appropri~e ~gmentation ~heme ~ will ~d~e mrgNm~k~g, produ~ posNoNn~ and ~e ~rm~ation of su~s~l m~k~g s~eNes andprograms. By ~cus~g ~ek inifiN effo~s on Ngh~rmance Nstance ~nn~s, a dearlydefined and very n~mw m~k~ ~gment, KnNN and Bow~man pm ~emsdv~ ~ p~fion to deNgn shoes e~ecNHy well suRed to these runn~s’ needs. The~ ~gmemation~heme, ~guably, pNyed ju~ as important a role in ~ek early success as Nd Bowerman~wife~ waffle iro!!

Launching and Expanding theNike Brand

In 1972, Blue Ribbon Spots launched KsNike brand at the U.S. Olympic trials aftera dispute between Blue Ribbon and Tiger

led to a b~akup of their relationsMp. In the 1972Olympic marathon, four of the top seven finishe~wore Nike shoes. By 1974, aker 10 yea~ ofdogged effo~ to build the compan~ the Nike shoew~h Bowerman% waffle sole was America~ besbselling t~ining shoe, and the Nike b~nd was on i~way to ~a~om. In 1978, tennis g~at John McEn-

roe signed with the compan~ which had changedi~ name to Nike, Inc., and tennis shoes became aprominent pa~ of the produ~ line. In 1985, apromising Chicago Bulls basketball rookie namedMichael Jonah endowed a line of Air Jo~an shoesand appall. By 1986, Nike~ worldwide salespassed the billion-d~r mark and Nike had be-come the acknowledged techn~og~al leader inthe footwear indu~ry. Befo~ long, Nike e~ended~s produ~ lines to include athletic appall.

World Cup 2002

Among Nike~ target markets by the turn of them~en~um was football--soccer to Ame~cans--the world~ most-played spot. Wkh World Cup2002 scheduled in Korea and Japan, Nike% productdev~ope~ knew that ext~me heat and humiditywould call for uniforms that would help playerscompete at top speed and ~ill keep their bodytemperatu~ down. Working for two yea~ withthe Korean team, Nike developed iB new Cool Mo-tion techn~og~ a material with a "two-layer struc-ture designed to ma~mize thermal comfo~ andventilation," said Nike% C~ative Produ~ Designerfor Football, Craig Buglass. The uniform~ innerlayer pulled perspiration away from the skin andspread it over a wide area for quick evaporation, tswater-rep~nt outer layer helped to keep the uni-form d~ under ext~me humidity during intenseaerobic adMty.

Did the uniforms perform? Ko~a, never knownas a football powe~ surprised many by winningthird place. Their relentle~ p~u~ and unendingteam speed impressed many obse~e~. And theh~hAech uniforms su~ly didn~ hu~.

STRATEGIC CHALLENGES ADDRESSED IN CHAPTER 6

The examp~ of Nike, Inc.~, ofiNns and early deve~pmem ~vN~ points out how a ~w

relative~ simp~ dedsons m deafly ~emify a markN ~gmem with unma or poorly m~

needs--~stance runn~s--and then develop innovaNe goods or services that meet the

needs of the targemd ~gme~ can provide entrde i~o a market n~he and serve as a ~un-

dation for subsequem expansion ~a can mvo~fioNze a m~kN or ~duary

Wha Phil KhaN, Bill Bow~ma~ and ~e manageme~ ~am ~ey ~mbled unde~

~ood so w~l N ~ NffemN groups of consume~--~ffem~ markN segme~s--have &~

~m~ warns and needs, bo~ ~ngible and intanDNe, ~ aNetic %~wea and ~ aN~ ap-

p~. In vKmN~ any makN, if ~ffemm ~gmems can be c~afly ~emNe~ spec~c

produas wi~ specffic maket~g programs can be dev~oped m meet b~h ~e phys~al

needs of~e consum~ ~.g., ~e lateral stabili~ and ~e extra cushioNng ~a ~stance rum

nets need ~ ~ek shoeQ as we~ as ~e em~%nN needs ~a consumes attach to ~eK pu~

sui~ ~.g., to ~ tha ~ey reign someday soar tNough ~e Nr and dunk a b~ke~N1 wi~

the panache of Michael JoNa~.In ChaN~ 6, we draw on the %unda~n of market knowledge and cu~om~ undeP

aan~ng e~aNNhed ~ the fir~ five chap~ to introduce what ae probab~ ~e mo~ im-

po~a~ and ~ndame~N runs ~ the m~kN~N toolkit: mark~ segmentation and target

marketin~ TogNh~ wi~ pmdu~ po~fioNng, wh~h we address ~ Chap~r 7, ~e~ ~Ms

pin, de ~e Na%rm on wh~h mog effe~Ne marketing programs ~e b~R. Learning m

app~ these tools effectively, however, ~quims addres~ng serum importam questions.

Cha~er Six ~e~ng A~ Manet ~gm~ 135

Why do m~kN segmem~ion and mtg~ marking make sen~? Why nm sell ~e same ~h-lefic shoes---or b~yde~ Nriine ficke~, beverages, or whateve~m everyone? How canp~entially ~a~Ne m~k~ ~gments be Nentified and defined? Finally, how can thesesegments be priorit~ed so th~ the mo~ a~racfive ones ~e pursued? Answering these que~fions shoed enaNe an entrep~neu~ a ventu~ cap~M investor in Silicon Valley, or a ma~kefing manager in a multin~nN firm to deNde which m~k~ segments should be ~ge~d and wh~h ~vestments should be made.

WHY DO MARKET SEGMENTATIONAND TARGET MARKETING MAKE SENSE?

Strategic IssueAre all ~e anNys~and con~us chNcesabo~ wNch ~gme~s ~serve ~al~ necessary?

M~t segment~n is the process by which a mark~ ~ dNided ~o ~ subse~ ofcu~om~s ~ s~fl~ needs and charac~risfics ~ ~ad them to respond ~ ~mfl~ w~s~ a ~c~ Wo~ o~g ~d ~g program. ~ ma~ ~s ~~ng ~e ~ a,racfiveness of various ~gments On mrms of m~k~ ~m~N, gro~hr~e, comp~ifive ~si~ and o~ ~o~) and ~e firm~ ~ and capab~fi~ m de-fiver ~at each ~gment wants, ~ order to choose wNch ~s R ~ serve. Productpo~ entails ~g~ng ~odu~ o~ ~d ma~ programs ~ ~c~e~es~N~h an enduring compline advantage ~ the ~rg~ maN~ by ~e~ a uNqueimag~ or poMfio~ ~ ~e cu~om~ ~nd. ~igN and Bow~man ~unded B~e ~bbonSpots ~ pa~ because ~ey saw a mark~ s~~e runners~ose needs werenot berg NI~ m~. They chose to target ~s ~gment because ruing was gmw~g inpop~ariW and because ~ey had pa~Nr knoM~ and expe~ise ~ey could bring to thepar~ They poNfioned ~dr i~Ne shoes as ~e ones th~ e~d ~e p~rman~ ofthe be~ m~e~ ~ ~e world an@ by i~~ of a~one rise who cared about Ns or

Thee t~ee dedNon ~~ ~~ ~ m~k~ and p~Nom~ are c~sdy ~d and h~e s~ong ~&~M~. AH ~ be ~H consN~ed and~~d X~ ~ is m be ~s~ ~ manaNng a gN~ pm~cbm~t ml~.No ma~er h~ NNe the ~, ~g ~s resources are usually l~ed ~d ~th the~ of a~nafi~ m~t ~gments ~aNe ~r i~L TMs, a fi~ mug ma~choices. Even ~ the u~suN case where a fi~ can a~rd to serve ~ m~k~ ~ Rmug &m~ ~e mo~ appmpfi~e aHocafion of ~s maN~ e~ a~v~ ~s. Butare N1 these ana~s and con~us chNc~ ~ ~ ~s to serve m~y ~~

Most Markets Are Heterogeneous

Because m~k~s ~e ~ homogeneous in bene~s wante~ pu~h~e rates, and price andpromotion dasticit~s, the~ response rates to produc~ and m~k~g programs Nffe~Variation among m~k~ ~gments ~ grodu~ preferences, size and growth ~ deman~mesa hab~s, and comp~Nve ~rucmms N~h~ affect ~e Nffemnces and response rates.Thu~ m~k~s are complex entNes ~at can be defined (~gmented) in a vafie~ of ways.The crificN issue is to find an appropri~e ~gmentation ~heme ~ will ~d~e mrgNm~k~g, produ~ posNoNn~ and ~e ~rm~ation of su~s~l m~k~g s~eNes andprograms. By ~cus~g ~ek inifiN effo~s on Ngh~rmance Nstance ~nn~s, a dearlydefined and very n~mw m~k~ ~gment, KnNN and Bow~man pm ~emsdv~ ~ p~fion to deNgn shoes e~ecNHy well suRed to these runn~s’ needs. The~ ~gmemation~heme, ~guably, pNyed ju~ as important a role in ~ek early success as Nd Bowerman~wife~ waffle iro!!

136 Section Two

Today~ Market Realities Often Make Segmenta~on Irnpera~ve

Mwk~ segmentation has become ~creasing~ impo~ant in the devdopment of mwketing~r~eg~s for several reasons. Fir~, popul~n grmvth has ~owe¢ and more produ~-mwkms an maturing. TNs sparks mort intense comp~ition as fim~s seek gm~vth via gainsin market shwe (the situ~n in ~e automob~e indus~y) as well as in an incnase in brandextensions (Stwbucks coffee ice ~eam, Colg~e ~mhbrushes, Visa ~aveler~ checks).

Secon¢ such social and economic forces as expan~ng ~sposable incomes, higher ed-ncationN levels, and more awweness of the world have produced cusmm~s with more va>~d and sopN~amd needs, ~sms, and li~sUles ~an ever befon. This has led to an ou>pouting of goods mad serv~es th~ compme wRh one anther for the opporR~nity ofs~isfying some group of consumes.

Thk< ~em is an in~easin~y important ~end ~wwd microsegmentation in which ex-~eme~ small markN segments an ~rgemd. For a ~scusdon of how one company built it-serf into a multim~lion-dollar business wh~e ser~ng a very small Nche see ExNbR 6.1.This ~end has been accd~amd in some indu~fies by new mchndogy such as compnte>aided defig~ wNch has enabled ilrms to mass~u~om~e many products as Nv~se as de-signer jeans and cars£ For exampE, many antomobHe compaNes are using a fleMble pro-duction sy~em th~ can produce Offerent modds on the same production line. Thisenables the company to produce cars made to order as does Gen~N M~ors in the UNmd~ams, which is using its online presence to free rune its build-to-ord~ wocess?

Finally, many mwkNing orgaNz~ns have made R easier m imp~ment sharp~ fo-cused mwkming programs by mere sharp~ targeting thek own ser~ces. For example,many new meOa have sprung up m appeN to narrow ~mre~ groups. In the Uinted King-dom, lhese inc~de spedal int~e~ maga~nes, such as Wcmcte~t and Au~c~7 md~ ~a-fions with form,s m~gemd m Offennt demograpNc groups, such as das~cN mu~< mcMcountrL and jaz~ n~ m mention ch~ shows of various Mnds; and cable TV channeN, suchas Sloj Spo~ and ~e Discovery Channd. Also more broad-based magazines, such as TheEconomist and Hello, offer advertise~ the oppor~Nty to target specific groups of peoplewithin thek subscription base. An adve~er can mrg~ specific regions, c~ies, or Z~codes, or even selemed income groups.

EXHIBIT 6.1 Can Under Atvnour Become Another Nike?

Kevin Plank did not set out to create a cult around ath-letic underwear--he simp~ wanted a comfo~ab~ Tshi~to wear under his football pads that would wick mois-tu~ away from his skin and proted him from heat e~hausflon during p~ctice. Aker hunting through all thesporing goods shops, Kevin ~alized that the~ was nota ~ngle produd on the market that met his needs. Heset out to create one. In Ma~h 1996, ju~ before g~du-ation, Kevin had some TshiRs sewn up in Lycra andfound that he had solved a common problem for all ofhis teammates.

Under Armouq the company that was soon born inhis g~ndmother’s basemenb made i~ fi~t sale of 200shiRs for $12 apiece to the football team at GeorgiaTech. Kevin ended his company~ fi~t year w~h sales of$17,000. Under Armour was marketed by wo~-of-mouth from happ~ sa6sfied cuAome~, and g~w withsales to athle~c teams in colleges. The company got iB

big break due to a produ~ p~cement in the Oliver Stonefootball movie Any Given Sunday Buzz from the movie,and a first-time ad in ESPN Magazine during the moviepremier< boo~ed Under Armour sales to $1.35 millionin 1999. Under Armour~ sales in 2001 drove tripe-d~growth in its catego~ and led indu~ pee~ at SporingGoods Business to ~cogn~e the company as "ApparelSupplier of the Yean" Under Armour po~ed sales ofUS$55 million in 2002.

The small unde~e~ed manet segment that KevinPlank d~covemd and his success have not gone unno-ticed. Iron~al~ recent entrants to this market are Nikeand Reebok. Kevin Plank~ ~a~n? "I’ll never let themsee me sweat."

Sources: Company Web ~te http://www.unde~rmouncom; ElaineShannon, "Tig~ Skiwies; They’re Wh~ Eve~one~ Wea~ng ThisSeason. Hem~ Why," Tim¢ Janua~ 13, 2003, p. A1. © 2003 TimeInc. Pe~in~d by permiss~n.

Chapter Six ~rgeting Attractive Market Segmen~ 137

HOW ARE MARKET SEGMENTS BEST DEFINED?

Strategic IssueTI~ ~e ~me impo~tant o~ectives ~ai~din ~e m~k~ ~gme~tion process.

Then we ~ne important o~e~s entN~d in ~e mann ~gment~n wocess:

¯ Identify a homogeneous segment that differs from other segments: The processshould identify one or more rel~Ne~ homogeneous gmnps of prospec~ve buye~ withregard to their wan~ and needs and!or thek like~ responses to Nfferences in the ele-men~ of the marketing mix--the 4 Ps (pmodud, p~ce, promotion, and place. For Bow-erman and Knight, Ngh-performance Osmnce runners was such a segment. Differenceswithin one markm segment should be small compared ~ ~fferences across various seg-ments (most high-performance Nsmnce runne~ probab~ have athlOic footwear needsth~ are quite similar to one anotheL but quire different from, sa£ the needs of baskm-ball players).

¯ Spedfy erReria that define the segment: The segmentation c~mtia should measure ordescribe lhe segments cMarly enough so lha members can be reaN~ identified and ac-cesse< in order for the markmer to know whmher a gNen prospective cu~omer is or isnot in the target markm and in order m reach the pmspectNe cumomer with adve~isingor other mal’kming commuNcation messages. Knight and Bowerman defined their ini-tial targm market as being comptised of members of running c~bs cr di~ance runnerson cdMN~e ~ack and cros~coun~y roams.

¯ Determine segment ~ze and po~ntiM: Finally, the segmentmion process should de-mrmine the size and market pomntiM of each segment for use in pfiotifizing wNch seg-ments to pursue, a topic we address in more detail Nmr in this chapma Knight and Bmv-ennan could easi~ ascertain how many such runners there were in Oregon or thewestern UNmd States, and they probably knew how many paks of shoes per year thetyp~al Nsmnce runner boughk at what average ptice.

GNen ~ese o~ective~ what Mnds of ~gment~n ctimtia, or desctiNo~, am mog

useful? Markem~ Nvide ~gmentation d~ctiNws into tN’ee m~or ca~go~es Nr bo~

consum~ and oNaNzationM marke~: demographk de~Hpto~ (which reflect who the

target cumom~s are), geographic d~eHpm~ ~w ~ey are), and behavioral descHp-

tors of vatious Mnds @ow ~ey behave wi~ ngwd to ~ek use and/or purcha~s ofa Nven

camgory of goods or ~r~ceO. We examine each of O~e camgofies below.

Who They Are: Demographic Descdpto~W~le firm ~mo~Mcs (age of firm, si~ of ~m, in~s~ ~c.) we use~l in ~gn~ent-ing ~inz~al mwkds, we u~M~ ~ink of ~mogmpNcs in ~rms of a~tibntes of in-¯ ~duM columns, as ~own in Exh~it 6.2. Some ~ampMs of ~mo~Mc &~riptwsused to ~gment co~um~ mwk~s we as ~ows:

Age: Since mobiM phone penetration has reached almo~ saturation levels in Europeand the United Kingdom, mob~e service provide~ are focusing on the 55-65 and 65-p~s segment to imwove usage and pene~ation respectively. Thek high Nsposableincomes and thek ability to devote time to new habhs is seen as a lucrative markmopportunity.4 At the other end of the demograpMc scale, Red Bull has b~lt a foRow-ing among youth wo~dwide (see ExNbit 6.3).

Sex: In AustrM~, Toyota launched an oNine information service aimed ~ women,recogNNng th~ women make up 50 percent ofToyotaN saMs and Orem~ influence 8out of 10 veNcM purchases?

b~come: H~he>income households purchase a Nsproportion~e number of celluNrphones, expensNe ca~, and fl~e~er t~ke~. In 2000, NoMa ~a~ed a whol~ owned

136 Section Two

Today~ Market Realities Often Make Segmenta~on Irnpera~ve

Mwk~ segmentation has become ~creasing~ impo~ant in the devdopment of mwketing~r~eg~s for several reasons. Fir~, popul~n grmvth has ~owe¢ and more produ~-mwkms an maturing. TNs sparks mort intense comp~ition as fim~s seek gm~vth via gainsin market shwe (the situ~n in ~e automob~e indus~y) as well as in an incnase in brandextensions (Stwbucks coffee ice ~eam, Colg~e ~mhbrushes, Visa ~aveler~ checks).

Secon¢ such social and economic forces as expan~ng ~sposable incomes, higher ed-ncationN levels, and more awweness of the world have produced cusmm~s with more va>~d and sopN~amd needs, ~sms, and li~sUles ~an ever befon. This has led to an ou>pouting of goods mad serv~es th~ compme wRh one anther for the opporR~nity ofs~isfying some group of consumes.

Thk< ~em is an in~easin~y important ~end ~wwd microsegmentation in which ex-~eme~ small markN segments an ~rgemd. For a ~scusdon of how one company built it-serf into a multim~lion-dollar business wh~e ser~ng a very small Nche see ExNbR 6.1.This ~end has been accd~amd in some indu~fies by new mchndogy such as compnte>aided defig~ wNch has enabled ilrms to mass~u~om~e many products as Nv~se as de-signer jeans and cars£ For exampE, many antomobHe compaNes are using a fleMble pro-duction sy~em th~ can produce Offerent modds on the same production line. Thisenables the company to produce cars made to order as does Gen~N M~ors in the UNmd~ams, which is using its online presence to free rune its build-to-ord~ wocess?

Finally, many mwkNing orgaNz~ns have made R easier m imp~ment sharp~ fo-cused mwkming programs by mere sharp~ targeting thek own ser~ces. For example,many new meOa have sprung up m appeN to narrow ~mre~ groups. In the Uinted King-dom, lhese inc~de spedal int~e~ maga~nes, such as Wcmcte~t and Au~c~7 md~ ~a-fions with form,s m~gemd m Offennt demograpNc groups, such as das~cN mu~< mcMcountrL and jaz~ n~ m mention ch~ shows of various Mnds; and cable TV channeN, suchas Sloj Spo~ and ~e Discovery Channd. Also more broad-based magazines, such as TheEconomist and Hello, offer advertise~ the oppor~Nty to target specific groups of peoplewithin thek subscription base. An adve~er can mrg~ specific regions, c~ies, or Z~codes, or even selemed income groups.

EXHIBIT 6.1 Can Under Atvnour Become Another Nike?

Kevin Plank did not set out to create a cult around ath-letic underwear--he simp~ wanted a comfo~ab~ Tshi~to wear under his football pads that would wick mois-tu~ away from his skin and proted him from heat e~hausflon during p~ctice. Aker hunting through all thesporing goods shops, Kevin ~alized that the~ was nota ~ngle produd on the market that met his needs. Heset out to create one. In Ma~h 1996, ju~ before g~du-ation, Kevin had some TshiRs sewn up in Lycra andfound that he had solved a common problem for all ofhis teammates.

Under Armouq the company that was soon born inhis g~ndmother’s basemenb made i~ fi~t sale of 200shiRs for $12 apiece to the football team at GeorgiaTech. Kevin ended his company~ fi~t year w~h sales of$17,000. Under Armour was marketed by wo~-of-mouth from happ~ sa6sfied cuAome~, and g~w withsales to athle~c teams in colleges. The company got iB

big break due to a produ~ p~cement in the Oliver Stonefootball movie Any Given Sunday Buzz from the movie,and a first-time ad in ESPN Magazine during the moviepremier< boo~ed Under Armour sales to $1.35 millionin 1999. Under Armour~ sales in 2001 drove tripe-d~growth in its catego~ and led indu~ pee~ at SporingGoods Business to ~cogn~e the company as "ApparelSupplier of the Yean" Under Armour po~ed sales ofUS$55 million in 2002.

The small unde~e~ed manet segment that KevinPlank d~covemd and his success have not gone unno-ticed. Iron~al~ recent entrants to this market are Nikeand Reebok. Kevin Plank~ ~a~n? "I’ll never let themsee me sweat."

Sources: Company Web ~te http://www.unde~rmouncom; ElaineShannon, "Tig~ Skiwies; They’re Wh~ Eve~one~ Wea~ng ThisSeason. Hem~ Why," Tim¢ Janua~ 13, 2003, p. A1. © 2003 TimeInc. Pe~in~d by permiss~n.

Chapter Six ~rgeting Attractive Market Segmen~ 137

HOW ARE MARKET SEGMENTS BEST DEFINED?

Strategic IssueTI~ ~e ~me impo~tant o~ectives ~ai~din ~e m~k~ ~gme~tion process.

Then we ~ne important o~e~s entN~d in ~e mann ~gment~n wocess:

¯ Identify a homogeneous segment that differs from other segments: The processshould identify one or more rel~Ne~ homogeneous gmnps of prospec~ve buye~ withregard to their wan~ and needs and!or thek like~ responses to Nfferences in the ele-men~ of the marketing mix--the 4 Ps (pmodud, p~ce, promotion, and place. For Bow-erman and Knight, Ngh-performance Osmnce runners was such a segment. Differenceswithin one markm segment should be small compared ~ ~fferences across various seg-ments (most high-performance Nsmnce runne~ probab~ have athlOic footwear needsth~ are quite similar to one anotheL but quire different from, sa£ the needs of baskm-ball players).

¯ Spedfy erReria that define the segment: The segmentation c~mtia should measure ordescribe lhe segments cMarly enough so lha members can be reaN~ identified and ac-cesse< in order for the markmer to know whmher a gNen prospective cu~omer is or isnot in the target markm and in order m reach the pmspectNe cumomer with adve~isingor other mal’kming commuNcation messages. Knight and Bowerman defined their ini-tial targm market as being comptised of members of running c~bs cr di~ance runnerson cdMN~e ~ack and cros~coun~y roams.

¯ Determine segment ~ze and po~ntiM: Finally, the segmentmion process should de-mrmine the size and market pomntiM of each segment for use in pfiotifizing wNch seg-ments to pursue, a topic we address in more detail Nmr in this chapma Knight and Bmv-ennan could easi~ ascertain how many such runners there were in Oregon or thewestern UNmd States, and they probably knew how many paks of shoes per year thetyp~al Nsmnce runner boughk at what average ptice.

GNen ~ese o~ective~ what Mnds of ~gment~n ctimtia, or desctiNo~, am mog

useful? Markem~ Nvide ~gmentation d~ctiNws into tN’ee m~or ca~go~es Nr bo~

consum~ and oNaNzationM marke~: demographk de~Hpto~ (which reflect who the

target cumom~s are), geographic d~eHpm~ ~w ~ey are), and behavioral descHp-

tors of vatious Mnds @ow ~ey behave wi~ ngwd to ~ek use and/or purcha~s ofa Nven

camgory of goods or ~r~ceO. We examine each of O~e camgofies below.

Who They Are: Demographic Descdpto~W~le firm ~mo~Mcs (age of firm, si~ of ~m, in~s~ ~c.) we use~l in ~gn~ent-ing ~inz~al mwkds, we u~M~ ~ink of ~mogmpNcs in ~rms of a~tibntes of in-¯ ~duM columns, as ~own in Exh~it 6.2. Some ~ampMs of ~mo~Mc &~riptwsused to ~gment co~um~ mwk~s we as ~ows:

Age: Since mobiM phone penetration has reached almo~ saturation levels in Europeand the United Kingdom, mob~e service provide~ are focusing on the 55-65 and 65-p~s segment to imwove usage and pene~ation respectively. Thek high Nsposableincomes and thek ability to devote time to new habhs is seen as a lucrative markmopportunity.4 At the other end of the demograpMc scale, Red Bull has b~lt a foRow-ing among youth wo~dwide (see ExNbit 6.3).

Sex: In AustrM~, Toyota launched an oNine information service aimed ~ women,recogNNng th~ women make up 50 percent ofToyotaN saMs and Orem~ influence 8out of 10 veNcM purchases?

b~come: H~he>income households purchase a Nsproportion~e number of celluNrphones, expensNe ca~, and fl~e~er t~ke~. In 2000, NoMa ~a~ed a whol~ owned

138 Section Two OpportunityAnalys~

EXHIBIT 6.2

DemogBphk Descdpto~

Age

Sex

Ho~eh~d life ~cle

Income

Occupa~on

Educa~on

Events

Race and ethnic origin

Some of the More Common~ Used Demographic Descriptor*

Exam~es of Categories

Under 2, 2-5, 6-11, 12-17, 18-2~ 25-3~ 35-49, 50-6~ 65 and over

Male, female

Young, single; newly married no child~ youngest child under 6; younge~ child 6 oroveu ~der coupes with dependent chi~ ~der coupes w~hout dependent chi~o~er coup~s ~ olde~ single

Under $15,000, $1 ~000-2~99~ $2~000-7~99~ etc.

Professiona~ manage6 cleHca~ sale~ supervisoL blue colla~ homemakeL ~uden~unem~oyed

Some high school, g~duated high ~hool, some college, g~duated college

Bi~hdays, g~dua~on~ annNe~aHe~ na~onal h~ays, sporing even~

Ang~axo~ African-America~ ~alian, Jewish, Scandina~a~ H~paniq Asian

Strateg~ IssueDemograp~c de~fip-tors are also impo~amin ~e ~gmemation of~du~fi~ m~k~s.

sub~O~y Verm, to create an O~>exc~sNe mobUe m~phone and services buiRaround the phone, targm~g ~e same cu~om~s who buy ~xury w~ches and cu~om-made cars?

Ocm~a~t: The sNes of ce~a~ Mnds ofproduc~ ~.g., wcrk shoes, amomoN~s,unarms, and ~ade magaz~eO are fled do~ to occupationN Upe. The increase inthe nnmber of working women has created needs for specialized goods and services~c~ng fmandN ~r~ce~ bus~s w~dmb~, convemence ~ods, amomobUes, andspecmbintem~ magaNn~.

Education: There is a ~rong posRNe correlation bmween ~e level of education andthe purcha~ of ~avd, books, magaNn~, ~sumnce, the~er tickets, and phmograpNcequ~mem.

Race and eNn~ ~qgin: More and morn compaN~ ~e t~gefing ~e~ ~gmeNs viaspedalized m~keting plogmms. In %e UNmd States, c~ compames have ~und waysto caer to the needs of ~e multicOmrN ~gme~, which is ~tim~ed to be 32 peme~of%e U.S. popOation ~ 2010. A ~ctive gend th~ had akeady em~ged by 2002was ~e Ashn-AmericanN affinity ~r upscNe c~s--~ey accou~ed ~r 15 peme~ ofBMW and 9 p~ce~ of M~cedes Benz sales]

DemograpNc de~riN~s ~e also impo~a~ ~ ~e ~gmem~n of ~du~fiN m~kms,

wNch are ~gmemed ~ two stages. The first, macrosegmenmtiom N~des the m~km ac-

coring m ~e ch~a~eristics of ~e bu~ng o~aNzation us~g such d~cfipm~ as age offirm, firm size, and ~du~ry affihation (SIC code ~ ~e UNmd St~eO. The int~nationN

coum~pa~ of ~C is %e gadmcmegory code.

The second stage, microsegm~tmtion, gmnps cu~om~s by ~e ch~acmristics of~e ~-

~duNs who ~fluence the purchaNng decision--for in~ance, age, sex, and posNon

witNn Ne orgaNz~n. Nmm~ional m~k~s ~e ~gmemed ~ a Omilar hierarchical Nsh-

ion, ~a~ing wi~ cou~ri~, ~llowed by groups of ~dNNuNs or bu~ng o~aNzations.

Who They Are: Geographic DescriptorsDiffemm ~c~ns v~y ~ ~ek sNes pmentiN, growth r~es, cusmm~ needs, cOmms, cli-

m~es, ~r!ce needs, and compmitive ~rucmms, as wall ~ purch~e rNes ~r a varieU of

goods. For example, more p~kup trucks are sold in ~e sou~we~ Um~d States, mwe vans

Chapter Six TargeUng A~mcUve Market 5egmen~ 139

EXHIBIT 6.3 Red BuH~ TargetedAppmach Wins

Aus~ia-based Red Bull is a company with one produ~,an energy drink contain~g the amino-ac~ lau~ne.While wo~ing for Unilevec Dietrich MateschEz traveledoken to Asia, whe~ he tried syrups that Asian bu~nes~men d~nk to ~tal~e. His expe~ence the~ led him tospot a manet oppo~unR~ and after modifying the drinkto appeal to Western palates, he launched Red Bull in1987. I~ signature, a slim, ~e~c~o~ 8.3 ounce can,has been an enormous hit with i~ target youth segmentacro~ the globe. For the year 2001, Red Bull had salesof $51 million in the United States alone and captu~d70 pe~ent of the energ~d~nk manet woddw~e.

From Stanfo~ Un~e~ity on C~fforn~ We~ Coa~to the beaches of Au~l~ and Th~n~ Red Bull hasmanaged to maintain its hip, cool image, with ~u~no mas~ma~et adverti~ng. It has in~ead opted for ag~-roots campaign. "In terms of att~cting new cus-tome~ and enhandng consumer loyalty, Red Bull has amo~ effective branding campaign than Coke or Pepsi,"

a~vss the Globe

said Nancy E Koehn, professor of business administra-tion at Ha~a~ Business School and author of B~ndNew." How Entrepreneurs Earned Consume~" ~ust fromWedgwood to D~L* Red Bull used C~giate BrandManage~ to p~mote the drink via f~e samples handedout at ~udent pa~ies. The company also o~an~ed e~t~me spots even~, for e~ample d~ dMng in Hawaii orsk~eboa~ing in San F~nd~ reinforcing the b~nd~e~me, on~h~edge image.

The beve~ge indu~ gian~ we~ ~Mng note. Coke~n a s~alth ma~eting campa~ whe~ Coke waspackaged in a slim can, ~min~cem of Red Bull~ pack-aging, and offend to cu~ome~ in hip, t~ndy ba~ andclubs in Manh~n and New York City.

Source: Jill 8russ, "Alternatively SpeaMng: AlternatNe Beve~gesKeep the ~du~ Abuzz with New P~du~s (Catego~ FocuS, Be~erage ~dustry 1, November 2002.

*Nancy E Koehn, Brand New: How Entrepreneu~ Earned Consume~’ Trust from Wedgwood ~ Deft (Boston: Ha~a~ Busine~School P~ss, 2001).

in the No~heast, and mine high-priced impo~s in the We~. More and more adve~Ners are

taldng advantage of geograph~ media buys, and Uni-Ma~s, Inc., a convenience store op-

erator of over 400 stores, focuses on small towns and rural areas, thereby avoiding big

competitors. In the fir~ 25 years of its histor> R never recorded a loss?

Geographic segment~ion is used in both consumer and organizationN markets and is

palticula~y important in lemihng and many services bu~nesse< where cu~omers are un-

willing to ~avd very far to obtNn the goods or services they requke. Thus, one way to seg-

ment retail marke~ is by di~ance or driving time ~om a pa~ular location. The area in-

eluded within such a geographicNly defined region is called a trade area.

Strategic IssueLow-co~ repots basedon census dam show ~edemographic profi~ of¯ e popul~ion mMNng~vi~in any gNen radiusof a part~ streetcorner or shopphg cen-mr ~c~n ~ ~eUnited States.

Geodemographic DescriptorsMany segme~afion ~hem~ invoke bo~ demograp~c and geog~p~c ~c~. Thu~ ~-

ta~e~ usuN~ warn ~ lcnow mmething about the people who 1Ne wkNn, say, a twmmi~

or fiv~mi~ ra~us of thek proposed new ~ore. Ndman M~cus, ~e upsca~ dep~tmem

~e, migM ~Nm one demographic gm~p wRNn a gN¢n ~ade ~ea, and Wal-Mart, a Ns-

coumeg migN target anothe~ C~fims (wwmelaritas.com) and other sources offer low-

co~ repots based on census d~a that show ~e demograpNc profile of ~e popOation re-

siNng within any gNen raOus of a partic~ s~eet corner or shopp~g center ~c~n m

¯ e UN~d States. These repots am useN1 M ~g ~e size a~d m~k~ po~mN1 of

a m~km ~gmem defined by a particO~ ~ade area. GeodemogmpNcs also a,emNs ~

pmOm con~m~ behavi~ by maMng demogmpNc, psychogmpNc, and consum~ ~>

m,ion avN~Ne at ~e Nock and Z~ code or po~code levels. Clarit~ PRIZM service

clas~fies all ~S. households imo 62 demogmpNcN~ and behaviwM~ Nstin~ c~sm~,

each of wNch, in turn, is assigned to one of 15 social groups2 Clarit~ offers similardams~s ~r F~nce and d~wh~e,’°

138 Section Two OpportunityAnalys~

EXHIBIT 6.2

DemogBphk Descdpto~

Age

Sex

Ho~eh~d life ~cle

Income

Occupa~on

Educa~on

Events

Race and ethnic origin

Some of the More Common~ Used Demographic Descriptor*

Exam~es of Categories

Under 2, 2-5, 6-11, 12-17, 18-2~ 25-3~ 35-49, 50-6~ 65 and over

Male, female

Young, single; newly married no child~ youngest child under 6; younge~ child 6 oroveu ~der coupes with dependent chi~ ~der coupes w~hout dependent chi~o~er coup~s ~ olde~ single

Under $15,000, $1 ~000-2~99~ $2~000-7~99~ etc.

Professiona~ manage6 cleHca~ sale~ supervisoL blue colla~ homemakeL ~uden~unem~oyed

Some high school, g~duated high ~hool, some college, g~duated college

Bi~hdays, g~dua~on~ annNe~aHe~ na~onal h~ays, sporing even~

Ang~axo~ African-America~ ~alian, Jewish, Scandina~a~ H~paniq Asian

Strateg~ IssueDemograp~c de~fip-tors are also impo~amin ~e ~gmemation of~du~fi~ m~k~s.

sub~O~y Verm, to create an O~>exc~sNe mobUe m~phone and services buiRaround the phone, targm~g ~e same cu~om~s who buy ~xury w~ches and cu~om-made cars?

Ocm~a~t: The sNes of ce~a~ Mnds ofproduc~ ~.g., wcrk shoes, amomoN~s,unarms, and ~ade magaz~eO are fled do~ to occupationN Upe. The increase inthe nnmber of working women has created needs for specialized goods and services~c~ng fmandN ~r~ce~ bus~s w~dmb~, convemence ~ods, amomobUes, andspecmbintem~ magaNn~.

Education: There is a ~rong posRNe correlation bmween ~e level of education andthe purcha~ of ~avd, books, magaNn~, ~sumnce, the~er tickets, and phmograpNcequ~mem.

Race and eNn~ ~qgin: More and morn compaN~ ~e t~gefing ~e~ ~gmeNs viaspedalized m~keting plogmms. In %e UNmd States, c~ compames have ~und waysto caer to the needs of ~e multicOmrN ~gme~, which is ~tim~ed to be 32 peme~of%e U.S. popOation ~ 2010. A ~ctive gend th~ had akeady em~ged by 2002was ~e Ashn-AmericanN affinity ~r upscNe c~s--~ey accou~ed ~r 15 peme~ ofBMW and 9 p~ce~ of M~cedes Benz sales]

DemograpNc de~riN~s ~e also impo~a~ ~ ~e ~gmem~n of ~du~fiN m~kms,

wNch are ~gmemed ~ two stages. The first, macrosegmenmtiom N~des the m~km ac-

coring m ~e ch~a~eristics of ~e bu~ng o~aNzation us~g such d~cfipm~ as age offirm, firm size, and ~du~ry affihation (SIC code ~ ~e UNmd St~eO. The int~nationN

coum~pa~ of ~C is %e gadmcmegory code.

The second stage, microsegm~tmtion, gmnps cu~om~s by ~e ch~acmristics of~e ~-

~duNs who ~fluence the purchaNng decision--for in~ance, age, sex, and posNon

witNn Ne orgaNz~n. Nmm~ional m~k~s ~e ~gmemed ~ a Omilar hierarchical Nsh-

ion, ~a~ing wi~ cou~ri~, ~llowed by groups of ~dNNuNs or bu~ng o~aNzations.

Who They Are: Geographic DescriptorsDiffemm ~c~ns v~y ~ ~ek sNes pmentiN, growth r~es, cusmm~ needs, cOmms, cli-

m~es, ~r!ce needs, and compmitive ~rucmms, as wall ~ purch~e rNes ~r a varieU of

goods. For example, more p~kup trucks are sold in ~e sou~we~ Um~d States, mwe vans

Chapter Six TargeUng A~mcUve Market 5egmen~ 139

EXHIBIT 6.3 Red BuH~ TargetedAppmach Wins

Aus~ia-based Red Bull is a company with one produ~,an energy drink contain~g the amino-ac~ lau~ne.While wo~ing for Unilevec Dietrich MateschEz traveledoken to Asia, whe~ he tried syrups that Asian bu~nes~men d~nk to ~tal~e. His expe~ence the~ led him tospot a manet oppo~unR~ and after modifying the drinkto appeal to Western palates, he launched Red Bull in1987. I~ signature, a slim, ~e~c~o~ 8.3 ounce can,has been an enormous hit with i~ target youth segmentacro~ the globe. For the year 2001, Red Bull had salesof $51 million in the United States alone and captu~d70 pe~ent of the energ~d~nk manet woddw~e.

From Stanfo~ Un~e~ity on C~fforn~ We~ Coa~to the beaches of Au~l~ and Th~n~ Red Bull hasmanaged to maintain its hip, cool image, with ~u~no mas~ma~et adverti~ng. It has in~ead opted for ag~-roots campaign. "In terms of att~cting new cus-tome~ and enhandng consumer loyalty, Red Bull has amo~ effective branding campaign than Coke or Pepsi,"

a~vss the Globe

said Nancy E Koehn, professor of business administra-tion at Ha~a~ Business School and author of B~ndNew." How Entrepreneurs Earned Consume~" ~ust fromWedgwood to D~L* Red Bull used C~giate BrandManage~ to p~mote the drink via f~e samples handedout at ~udent pa~ies. The company also o~an~ed e~t~me spots even~, for e~ample d~ dMng in Hawaii orsk~eboa~ing in San F~nd~ reinforcing the b~nd~e~me, on~h~edge image.

The beve~ge indu~ gian~ we~ ~Mng note. Coke~n a s~alth ma~eting campa~ whe~ Coke waspackaged in a slim can, ~min~cem of Red Bull~ pack-aging, and offend to cu~ome~ in hip, t~ndy ba~ andclubs in Manh~n and New York City.

Source: Jill 8russ, "Alternatively SpeaMng: AlternatNe Beve~gesKeep the ~du~ Abuzz with New P~du~s (Catego~ FocuS, Be~erage ~dustry 1, November 2002.

*Nancy E Koehn, Brand New: How Entrepreneu~ Earned Consume~’ Trust from Wedgwood ~ Deft (Boston: Ha~a~ Busine~School P~ss, 2001).

in the No~heast, and mine high-priced impo~s in the We~. More and more adve~Ners are

taldng advantage of geograph~ media buys, and Uni-Ma~s, Inc., a convenience store op-

erator of over 400 stores, focuses on small towns and rural areas, thereby avoiding big

competitors. In the fir~ 25 years of its histor> R never recorded a loss?

Geographic segment~ion is used in both consumer and organizationN markets and is

palticula~y important in lemihng and many services bu~nesse< where cu~omers are un-

willing to ~avd very far to obtNn the goods or services they requke. Thus, one way to seg-

ment retail marke~ is by di~ance or driving time ~om a pa~ular location. The area in-

eluded within such a geographicNly defined region is called a trade area.

Strategic IssueLow-co~ repots basedon census dam show ~edemographic profi~ of¯ e popul~ion mMNng~vi~in any gNen radiusof a part~ streetcorner or shopphg cen-mr ~c~n ~ ~eUnited States.

Geodemographic DescriptorsMany segme~afion ~hem~ invoke bo~ demograp~c and geog~p~c ~c~. Thu~ ~-

ta~e~ usuN~ warn ~ lcnow mmething about the people who 1Ne wkNn, say, a twmmi~

or fiv~mi~ ra~us of thek proposed new ~ore. Ndman M~cus, ~e upsca~ dep~tmem

~e, migM ~Nm one demographic gm~p wRNn a gN¢n ~ade ~ea, and Wal-Mart, a Ns-

coumeg migN target anothe~ C~fims (wwmelaritas.com) and other sources offer low-

co~ repots based on census d~a that show ~e demograpNc profile of ~e popOation re-

siNng within any gNen raOus of a partic~ s~eet corner or shopp~g center ~c~n m

¯ e UN~d States. These repots am useN1 M ~g ~e size a~d m~k~ po~mN1 of

a m~km ~gmem defined by a particO~ ~ade area. GeodemogmpNcs also a,emNs ~

pmOm con~m~ behavi~ by maMng demogmpNc, psychogmpNc, and consum~ ~>

m,ion avN~Ne at ~e Nock and Z~ code or po~code levels. Clarit~ PRIZM service

clas~fies all ~S. households imo 62 demogmpNcN~ and behaviwM~ Nstin~ c~sm~,

each of wNch, in turn, is assigned to one of 15 social groups2 Clarit~ offers similardams~s ~r F~nce and d~wh~e,’°

140 Se~ion Two

Strateg~ IssueG~orade~ ~mp~ seg-menmtmn scheme~ea~d a wlm~ newc~egory of "spotsbevemges£

How They Behave: Behavioral Descriptors

Them is no limk ~ He numb~ of ins~ht~l ways succ~s~l ma~e~ have ~gme~edm~ke~ ~ beha~orM terms. Kn~N and Bowerman orig~N~ targemd Ng~p~rmance~stmme runne~. SpeNN~ed and Gary Fisher ~N~ bicyclists who wish to fide on Nn~e-~ack ~a~s or bac~coumry ~Nn. EuropeN EasyJ~ airl~e odg~al~ ~rgNed ~isure~avM~s. G~omdeN oHg~al ~ mark~ con~ed of ~NNes who needed m mp~Nshw~ and salts ~ tNough perspiration. TNs sim~e ~gmentation scheme ~e~ed a who~new camgory of"~orts beverages]’ wNch g~w to ~c~de emries ~om Coke (Powemde)and Pep~ (All Sport), ~ough G~omde s~ll dom~es the c~egory w~h an 80 p~ce~m~k~ shoe. TNs on~ime Nche m~k~ has grown into a $2.2 Nll~n mark~ ~ ~e UNmdStates alone?’

These exam~ Nl demons~e the power of NgNy spe~fic beha~N descriN~s ~defiNng sharp~ ~cused m~k~ ~gmems, ba~d nm on u~o ~e ~rg~ consumes ~e eru~ ~ey ~ve, but based on wh~ ~ey do. In virtually ev~y consum~ and orgaNz~nNm~k~ H~e ~e pmbab~ ~gmems l~e ~e ju~ wNfing ~ be Ne~ed and targ~ed by~ggNN1 m~k~s. Beha!orN de~rip~ can ~ke many ~rms, ~c~Nng ~o~ ba~don consum~ needs; on morn general behav~ral patterns, inc~ding lifes~le or social class;an< ~ o~anizationM m~kNs, on ~e s~ucm~ of firms’ pu~ha~ng activit~s and He ~pesof bu~ng situations ~ey encou~e~

Consumer Needs

C~m~ n~ are ex~d ~ benefi~ ~ug~ from a particular ~oduct ~ ser~. D~~reN ~dNidual cu~om~s have Nffere~ needs and ~us aaach ~ffe~ degrees of im-po~ance to ~e benefi~ offered by dift?mm produc~. In the en& ~e Noduct Nat No,des¯ e b~t bun~e of bene~s--~ven he cugom~ part~ needs--is mog 1Ne~ m bepurchased. For an examp~ of how t~gefing a ~ set of consum~ needs has taken alate emmm to ~e top of ~e car remal ~dus~ see ExNb~ 6.4.

EXHIBIT 6.4

in ~963, Jack Tabor added car rentals to his small auto-movie lea~ng bu~ness. Ta~or~ ~tegy was to serve acom~ete~ diffe~nt target manet than the m~ors,HeRz and A~ and pro~de ~p~cement ca~ for peopleinvoked in acdden~ or b~akdowns and those who we~grounded while their ca~ were being se~iced. Se~ingth~ manet ~qui~d a complete~ different so~ of se~vice--delivering the car to the cu~ome~ for example--than the m~o~ prodded. "This ~uff is a lot mo~ com-plicated than handing out keys at the airport," saysAndy Taylo~ Jack~ son and now chairman and CEO. Thebusiness g~w steadi~ ff unexcep~onal~ un~l the 1990s,when the younger Tabor ~epped on the gas and cruisedpar He~z and Avis to lake the number one spot in theU.S. market, w~h a fleet of 500,000 vehicles and morethan $6 billion in revenue for the ~ill pr~ate~ held corn-pang Europe is Ta~or~ next target, and the inkial ent~has al~ady begun, into the U.K., I~land, and Germang

While Enterprise now se~es taNet segmen~ beyondthe ca~mNacement market, ~s clear focus on a narrowly

defined segment that the m~o~ had ignored providedthe beachhead and an impregnaNe foundatbn onwhich the company was able to grow. Equal~ important,the ~rong cu~omer se~ice cuRum and decen~al~edderision making that were crucial to the initial ~tegyhave become the ~nchpin of the companyg wider su~cess. Enterprise measures each of i~ b~nches eachmonth in terms of both profitaNlity and cu~omer seF~ce (Two questions are asked of each cu~omer: Are yousa~sfied with our se~ice? Would you come back?) andno one ge~ promoted from b~nches that have below-average cu~omer ser~ce scores, no ma~er how strongtheir finand~ performance. Enterprise has found thatcu~omers who answer "complete~ sa~sfied" on que~~on one are thee ~mes more likely to come back.

Clear targeting. Except~nal cu~omer se~ice. R; acom~na~on thatg kept Enterprise rolling for 40 yea~.

Source: ~mon Londo~ "Dd~ng Home the SeHice Dhic," Finan-cial Times, June 3, 2003. Reprinted by p~mission.

Chapter Six Targedng A~racdve Market Segmen~ 141

Since purcha~ng ~ a problem-solving proces~ consumers eva~e product or brand aNmrna~ves on the ba~s of desked chara~e~s~cs and how valuaNe each cham~e~sfic is tothe consumer--choice c~Nm Marke~ can define segments according ~ these Nf~E~ent cho~e c~ria in ~rms of He presence or absence ofce~ain charac~s~cs and the im-po~ance aaached m each. Firms typical~ s~gle out a Hmimd number of benefit segmentsto mrg~. Thus, for example, Nfferent automobile manuNcmm~ have emphasized diffe~ent benefits over the years, such as Volvo~ salty (presence of fide-door akbag~ versusJaguar~ stylin~ quicknes~ and ~atus.

In organiz~ionM markms, cu~omers con~der relevant benefits th~ include produ~performance in NftErent use Ntuations. For example, Cray computers are bought becauseHey meet ~e high-speed compu~fionM ~q~rements of a sm~l group of cu~omers suchas governments, unNe~ities, and research labs. Other consecrations in the purchase ofin-du~ri~ products/services include on-time d~NerN creNt mrm~ economy, spa~ paffsavaihbH~ and ~NNng.

Product-Related Behavioral Descripto~In addition m Ngh~ specific behav~ral descripto~ such as those just discusse¢ there aremore general produ~-mlamd desc~ptors as well. They include product usage, ~ya~£ pu~chase pre~spositio~ and purchase ~fluence, a~ of which can be used to segment bothconsumer and industrial marke~. Product usage ~ important because fl~ many mark, s asmall propo~ion of pmenthl cu~omers makes a Ngh percentage of aH purchases. In o~ganizationN marke~, the cu~omers are be~er know~ and heavy use~ (often cNled keyaccount) are easier to Nentify.

Mmket segmentation based on sources of purchase influence for the product c~egory~ re~vant for both consumer and orgaNzationN mark, s. Many pmduc~ used by variousfami~ members are purchased by the wi~, but joint husband-wi~ dedNons are becom-ing morn cmnmon. CNNren~ pmduc~, prescNp~on drugs, and ~fis am clearly influencedby a variety of inOviduaN. In orgaNzational marke~, several ~N%duNs or uN~ w~hvar~ng degrees of influence partic~aW in the bu~ng cen~

L6resty/eSegmentation by li~sUle, or psychogmpNc~ ~gments m~ke~ on the baos of con-sumps’ acfiv~ intact, and opinions--in o~er words, wh~ ~ey do or befieve, rmher¯ an who Oey are in a demograpNc sense. From such ~formation ~ is possible to in~rwha Upes of produms and ~r~ces appeN to a p~ficO~ group, as well as how be~ tocommu~c~e wiO ~duNs ~ the group. For examN< Goodye~ ~m and Rubber andOg~W and M~her (an advertising agency), worMng sep~amly, have devdoped severalclas~fications ~r ~cb~ ~e ~gmen~. ~m Good)e~ effo~ cons~ ofs~ groups--the pm~e buyer, ~e com~naNe con~ative, the vMue shoppec the pmmndeg the~usting p~m~ and ~e b~gaM hunter. O~Ny and MaH~ propo~s 10 g~bN ~gmentsbased on li~sWle chamcm~stics--basic needs, ~ d~l, tradit~nal ~mi~ li~, conven-tional ~mi~ li~, ~o~a>me, mmebody bmm~ md con~rv~ism, young opfimi~, ~sN~achieveg and sochl~ aw~e.’~

~an~N Re~ch N~knte (SRI) has ~e~ed a U.S. segmentation service ~alled VALS2~ wldch b~lds on ~e concept of sel~orientation and mmumes ~r the ~dN~ual. Se~~4en~on is based on how consumes pursue and ~q~m pl’oduc~ and s~ces H~ prm~de s~£~n and ~epe He:r Menfifi~. M dd~g s< ~ey ~e mctiva~d by He orien~-fions of princ~E, ~ams, and action. Princ~le-ofiented consumes are motiv~ed byab~ra~ and idea~zed crimria, whi~ ~a~>oriented consumes shop ~r produ~s Hatdemons~e ~e consum~ suc~. Actiomofiented consumes ~e g~ded by ~e need ~r~dal ~ phy~l acfi~ty, vafi~ ~nd risk mMn~

140 Se~ion Two

Strateg~ IssueG~orade~ ~mp~ seg-menmtmn scheme~ea~d a wlm~ newc~egory of "spotsbevemges£

How They Behave: Behavioral Descriptors

Them is no limk ~ He numb~ of ins~ht~l ways succ~s~l ma~e~ have ~gme~edm~ke~ ~ beha~orM terms. Kn~N and Bowerman orig~N~ targemd Ng~p~rmance~stmme runne~. SpeNN~ed and Gary Fisher ~N~ bicyclists who wish to fide on Nn~e-~ack ~a~s or bac~coumry ~Nn. EuropeN EasyJ~ airl~e odg~al~ ~rgNed ~isure~avM~s. G~omdeN oHg~al ~ mark~ con~ed of ~NNes who needed m mp~Nshw~ and salts ~ tNough perspiration. TNs sim~e ~gmentation scheme ~e~ed a who~new camgory of"~orts beverages]’ wNch g~w to ~c~de emries ~om Coke (Powemde)and Pep~ (All Sport), ~ough G~omde s~ll dom~es the c~egory w~h an 80 p~ce~m~k~ shoe. TNs on~ime Nche m~k~ has grown into a $2.2 Nll~n mark~ ~ ~e UNmdStates alone?’

These exam~ Nl demons~e the power of NgNy spe~fic beha~N descriN~s ~defiNng sharp~ ~cused m~k~ ~gmems, ba~d nm on u~o ~e ~rg~ consumes ~e eru~ ~ey ~ve, but based on wh~ ~ey do. In virtually ev~y consum~ and orgaNz~nNm~k~ H~e ~e pmbab~ ~gmems l~e ~e ju~ wNfing ~ be Ne~ed and targ~ed by~ggNN1 m~k~s. Beha!orN de~rip~ can ~ke many ~rms, ~c~Nng ~o~ ba~don consum~ needs; on morn general behav~ral patterns, inc~ding lifes~le or social class;an< ~ o~anizationM m~kNs, on ~e s~ucm~ of firms’ pu~ha~ng activit~s and He ~pesof bu~ng situations ~ey encou~e~

Consumer Needs

C~m~ n~ are ex~d ~ benefi~ ~ug~ from a particular ~oduct ~ ser~. D~~reN ~dNidual cu~om~s have Nffere~ needs and ~us aaach ~ffe~ degrees of im-po~ance to ~e benefi~ offered by dift?mm produc~. In the en& ~e Noduct Nat No,des¯ e b~t bun~e of bene~s--~ven he cugom~ part~ needs--is mog 1Ne~ m bepurchased. For an examp~ of how t~gefing a ~ set of consum~ needs has taken alate emmm to ~e top of ~e car remal ~dus~ see ExNb~ 6.4.

EXHIBIT 6.4

in ~963, Jack Tabor added car rentals to his small auto-movie lea~ng bu~ness. Ta~or~ ~tegy was to serve acom~ete~ diffe~nt target manet than the m~ors,HeRz and A~ and pro~de ~p~cement ca~ for peopleinvoked in acdden~ or b~akdowns and those who we~grounded while their ca~ were being se~iced. Se~ingth~ manet ~qui~d a complete~ different so~ of se~vice--delivering the car to the cu~ome~ for example--than the m~o~ prodded. "This ~uff is a lot mo~ com-plicated than handing out keys at the airport," saysAndy Taylo~ Jack~ son and now chairman and CEO. Thebusiness g~w steadi~ ff unexcep~onal~ un~l the 1990s,when the younger Tabor ~epped on the gas and cruisedpar He~z and Avis to lake the number one spot in theU.S. market, w~h a fleet of 500,000 vehicles and morethan $6 billion in revenue for the ~ill pr~ate~ held corn-pang Europe is Ta~or~ next target, and the inkial ent~has al~ady begun, into the U.K., I~land, and Germang

While Enterprise now se~es taNet segmen~ beyondthe ca~mNacement market, ~s clear focus on a narrowly

defined segment that the m~o~ had ignored providedthe beachhead and an impregnaNe foundatbn onwhich the company was able to grow. Equal~ important,the ~rong cu~omer se~ice cuRum and decen~al~edderision making that were crucial to the initial ~tegyhave become the ~nchpin of the companyg wider su~cess. Enterprise measures each of i~ b~nches eachmonth in terms of both profitaNlity and cu~omer seF~ce (Two questions are asked of each cu~omer: Are yousa~sfied with our se~ice? Would you come back?) andno one ge~ promoted from b~nches that have below-average cu~omer ser~ce scores, no ma~er how strongtheir finand~ performance. Enterprise has found thatcu~omers who answer "complete~ sa~sfied" on que~~on one are thee ~mes more likely to come back.

Clear targeting. Except~nal cu~omer se~ice. R; acom~na~on thatg kept Enterprise rolling for 40 yea~.

Source: ~mon Londo~ "Dd~ng Home the SeHice Dhic," Finan-cial Times, June 3, 2003. Reprinted by p~mission.

Chapter Six Targedng A~racdve Market Segmen~ 141

Since purcha~ng ~ a problem-solving proces~ consumers eva~e product or brand aNmrna~ves on the ba~s of desked chara~e~s~cs and how valuaNe each cham~e~sfic is tothe consumer--choice c~Nm Marke~ can define segments according ~ these Nf~E~ent cho~e c~ria in ~rms of He presence or absence ofce~ain charac~s~cs and the im-po~ance aaached m each. Firms typical~ s~gle out a Hmimd number of benefit segmentsto mrg~. Thus, for example, Nfferent automobile manuNcmm~ have emphasized diffe~ent benefits over the years, such as Volvo~ salty (presence of fide-door akbag~ versusJaguar~ stylin~ quicknes~ and ~atus.

In organiz~ionM markms, cu~omers con~der relevant benefits th~ include produ~performance in NftErent use Ntuations. For example, Cray computers are bought becauseHey meet ~e high-speed compu~fionM ~q~rements of a sm~l group of cu~omers suchas governments, unNe~ities, and research labs. Other consecrations in the purchase ofin-du~ri~ products/services include on-time d~NerN creNt mrm~ economy, spa~ paffsavaihbH~ and ~NNng.

Product-Related Behavioral Descripto~In addition m Ngh~ specific behav~ral descripto~ such as those just discusse¢ there aremore general produ~-mlamd desc~ptors as well. They include product usage, ~ya~£ pu~chase pre~spositio~ and purchase ~fluence, a~ of which can be used to segment bothconsumer and industrial marke~. Product usage ~ important because fl~ many mark, s asmall propo~ion of pmenthl cu~omers makes a Ngh percentage of aH purchases. In o~ganizationN marke~, the cu~omers are be~er know~ and heavy use~ (often cNled keyaccount) are easier to Nentify.

Mmket segmentation based on sources of purchase influence for the product c~egory~ re~vant for both consumer and orgaNzationN mark, s. Many pmduc~ used by variousfami~ members are purchased by the wi~, but joint husband-wi~ dedNons are becom-ing morn cmnmon. CNNren~ pmduc~, prescNp~on drugs, and ~fis am clearly influencedby a variety of inOviduaN. In orgaNzational marke~, several ~N%duNs or uN~ w~hvar~ng degrees of influence partic~aW in the bu~ng cen~

L6resty/eSegmentation by li~sUle, or psychogmpNc~ ~gments m~ke~ on the baos of con-sumps’ acfiv~ intact, and opinions--in o~er words, wh~ ~ey do or befieve, rmher¯ an who Oey are in a demograpNc sense. From such ~formation ~ is possible to in~rwha Upes of produms and ~r~ces appeN to a p~ficO~ group, as well as how be~ tocommu~c~e wiO ~duNs ~ the group. For examN< Goodye~ ~m and Rubber andOg~W and M~her (an advertising agency), worMng sep~amly, have devdoped severalclas~fications ~r ~cb~ ~e ~gmen~. ~m Good)e~ effo~ cons~ ofs~ groups--the pm~e buyer, ~e com~naNe con~ative, the vMue shoppec the pmmndeg the~usting p~m~ and ~e b~gaM hunter. O~Ny and MaH~ propo~s 10 g~bN ~gmentsbased on li~sWle chamcm~stics--basic needs, ~ d~l, tradit~nal ~mi~ li~, conven-tional ~mi~ li~, ~o~a>me, mmebody bmm~ md con~rv~ism, young opfimi~, ~sN~achieveg and sochl~ aw~e.’~

~an~N Re~ch N~knte (SRI) has ~e~ed a U.S. segmentation service ~alled VALS2~ wldch b~lds on ~e concept of sel~orientation and mmumes ~r the ~dN~ual. Se~~4en~on is based on how consumes pursue and ~q~m pl’oduc~ and s~ces H~ prm~de s~£~n and ~epe He:r Menfifi~. M dd~g s< ~ey ~e mctiva~d by He orien~-fions of princ~E, ~ams, and action. Princ~le-ofiented consumes are motiv~ed byab~ra~ and idea~zed crimria, whi~ ~a~>oriented consumes shop ~r produ~s Hatdemons~e ~e consum~ suc~. Actiomofiented consumes ~e g~ded by ~e need ~r~dal ~ phy~l acfi~ty, vafi~ ~nd risk mMn~

142 Section Two

Strateg~ IssueThose i~e~ed ~ heVALS ~gme~n~heme can comNme ashort survey on heVALS Web sRe and ~s-cov~ he VALS~gment m w~ch ~ybelong.

Strategk Issue

Insight~l ~d inn~five ma~~gment~on ~ ofl~

the key m m~k~gb~a~oughs.

Resomves ~c~de all of ~e psychNog~al, phy~cN, demograpNc, and m~eriN means

consnmers have to draw on. They recede education, income, ~lf-confidence, heNth, ea-

gerness to bu> imdl~ence, and energy level~n a cont~uum ~om minimN m abundaN.

Based on these two Omen~ons, VALS 2 defines eight segmen~ that exh~R ~stinctive

behavior and decision maMng--acmalizers, fiflfillers, acNevers, experiencer~ befievers,

~rive~, makers, and ~rugg~. Claritas and similar commercial orgaNz~ns Nemify

each of the mspondems as m thek VALS type, ~emby permitt~g a ~o~mla~ific~n of

VALS type w~h the wodu~ usage and personN ~formation cd~cmd by such compaNes.

Thus, users can dmermine what each VALS segment bought, what ~ek mesa habRs are,and simil~ dam. The VALS sy~em has been further developed ~ Europe and Asia)~ Those

interested in the VALS segmem~ion scheme can complete a sho~ survey on the VALS

Web si~ (log onto http://fu¢ure.sri.eom/VALS/VALSinde~shtml) and O~ov~ theVALS segment m which ~ey bdong.

Social Class

Every sodety has Rs st~us groupings based large~ on simi~rities in income, educ~n,

and occupation.~ Because researchers have long documented the values of the various

classes, ~ is possible to in~r ce~a~ behavior concerning a given wodum. For example,

the midge Oasses ~nd to place mine va~e on education, fami~ activities, cleanliness, andbeing upqo-d~e than do ~we~dass ~milies. In the inmrn~ion~ fide one has to be care-

ful in using sod~ class as a segmentation variable since the Offerences among classes can

become ~u~e¢ as they are in the Scandinav~n countries.’~ In Americ~ many of the cri-

~fia used to define class ~atus seem to some to be no ~nger appl~aNe as the nation be-

comes incmaongly ~agmented into dozens of distinct subcultures, each with its own

unique ta~es and ambitions. As nomd ea~ieg Clarims, Inc., has ~entified 62 ~inctclasses in the U~md St~es, each with i~ own set ofbd~ and aspkations.~

O~gan&aKonal or Firm Beha~oml Descripto~w

Purchasing ~ru~ure and buying sRu~n ~gmem~ion de~fiNws are uNque to orgaN-

zationN m~kms. Purehafing structure is the degree to wNch the purcha~ng a~NRy is

cemmEzed. In such a ~rucmm ~e buyer is l~e~ to consider all transactions with a gNen

supN~r on a Nobal basis, to emphasize co~ savings, and to minimize risk. In a decen-

~aEzed situation, ~e buyer is apt to be more sen~five to the user~ nee< to emphas~e

wodum quafiU and ~ drink> and m be less cos>con~us.

The bufing sRuafion de~riNor ~c~des three N~ types of ~mations: s~a~N

mbu£ a recurring situation handled on a mm~e basis; moNfied tabu> wNch occurs when

some demem, such as price or delNery ~hedOes, has changed in a cfient-supN~r rela-

tionsNp; and a new buying fim~ which may require ~e g~hering of consN~aNe in-~rm~n and an eva~ation of Nmrn~Ne suppliers.

Innovagve Segmentadon: A Key to Marketing BreakthroughsAt the beginning of this section, we identified three o~ectives of the m~k~ ~gment~ion

process.

¯ Identify a homogeneous segment ~ Nffers ~om others.

¯ Specify crimria th~ define ~e segment.

¯ DNermine segment si~e and pmentiN.

Effective markOers, such as the creators of Nike ~Nm~ shoes, Red Bull energy drinks,

and Enterpri~ Rentm-Cag know th~ meeting these o~ectives through insNhtful and in-

nov~Ne mark~ segmentation is o~en lhe key ~ markOing breakthroughs. O~en, combi-

nations of ~ffemnt de~fipto~ are used to more pmdse~ target an aUramNe segment:

Cha~er Six ~efingA~ Ma~gm~G 143

EXHIBIT 6.5

Two broad kinds of softwa~ app~ations are used insegmenting mark,s. Data mining ap~<ations enablethe marke~r to examine a cu~omer database to ide~i~paRerns of variables that pmdi~ which cu~omem buy ordon’t bu> as well as how much they bu> CART® andMARSTM from Salfo~ Sy~ems, Inc. (www.salford-sys~ms.com) a~ two such ap~ation> Various tools forana~ng the demog~ph~ makeup of a proposed ~

get market am also av~b~. National Derision Sy~ems(www.ends.com) is one such supplier. Various analyticalprocedures in SPSS MR or other sta~s~cal software pack-ages are also useful for market segmentation purposes,

Souse: "~doW ~ MaAeting ~n~og~ S~twa~ & I~em~~. Ma~eting News, July 17, 2000. Used ~ ~rm~bn of

¯ e Amed~n Ma~ing A~od~n.

~tegk Issue

At he ~mM~n ofmany a m~km~gbmaMDough one oftenfinds an ~gN~l seg-memnon scheme ~~ ~p~ ~cu~d in ab&a~ way.

perhaps some beha~al Nmen~on mg~h~ wi~ a camful~ defined demogl’apNc groNewRNn some geogmpNc region. Genially, ~ is u~N1 m know ~e demogl’apNc prone of¯ e mNm m~km m be pursue~ even ~ ~e drN~g ~me beNnd ~e ~gmeN~n ~hemeis geogmpNcN an~or beha~orN ~ n~um, because unde~nOng the demograpNc pro-fi~ of a target m~km enabEs ~e m~k~ m be~er choose mrgemd advertiNng media oro~ markm~g commuNcation vends.

As is ~e case ~r many kinds of m~keting decision maMn~ various compme>b~eddecision suppo~ sy~ems have been developed to aid m~ke~ as ~ey wrestle with ma~k~ ~gmentation dedNons. Some wide~ used sy~ems are Nentified in ExNbR 6.5.

As several examp~s ~ this section have show~ ~ ~e ~und~n of many a m~kefingbmaMhrough one often finds an ~MgNN1 ~gmem~n ~heme %~ is sh~p~ ~cu~d ~a beha~l way. M~kem~ wi~ superior m~k~ knowledge am pmbab~ morn l~e~ ~generic the in~g~s necessary to define m~k~ ~gme~s ~ ~ese innovaNe and mean-ingful ways. Kn~hr and Bow~ma~ as runn~s ~em~N~, had the necessary m~kOknowledge to see hmv di~ance runners, as a m~km ~gment, were underserved. Thek ~-sN~, mge~ w~h ~e developmem of innovaNe pmdums and ~e c~ation of effemivem~keting programs, led the growth of the ~Nm~ ~mwe~ m~km, as consumes pu>chased ~ffem~ shoes ~r ~eir ~ffemm ~Nm~ pu~uRs, and ultim~e~ mvolutioNzed ~eaNm~ ~mwear ~dus~

CHOOSING ATTRACTIVE MARKET SEGMENTS: A FIVE-STEP PROCESS

Strategk IssueMost firms no longeraim a ~ngle pmdu~and mak~Mg programat fl~e mass make.

Moa firms no long~ Nm a sin~e produ~ and maketing program a ~e m~s make. In-

~ea¢ ~ey break ~at makm into a numb~ of homogeneous ~gmems on ~e basis of

meaNng~fl ~ffemnc~ in ~e benefits sougN by ~ffemm groups of cusmm~s. Then ~ey

~Hor produms and marketing programs m ~e partic~ deoms and idiosyncrasies of each

~gme~. But not aN segmen~ rep~sent eq~mlly am~cfi~.e opportunities for ~e firm. To

pfiorifize m~et ~gmems by ~eir po~ntiM, matkN~s must eva~ae ~eir Nmm a~ac-

tNen~s and ~dr N’m~ stren~hs and capab~Ries mhtNe m ~e ~gmems’ needs and com-

pline Mmations.

W~hin an eaaNished firm, raher than allowing each bus~ess uMt or produa manag~

to develop an approach to evaluate ~e pmentiM of alt~native mak~ ~gmems, ~ is often

be~er to app~ a common anal~ical ~amework acm~ ~gmems. WRh ~N approach, man-

ages can compare the Nmm pomntial of ~ffemm ~gmems us~g ~e same set of cri~ria

and then priorifize them to decide which ~gmems to ~rget and how resources and ma~

keting efforts should be MMcae& One riseN1 analytical Kamework manages cr emmpm-

neurs can use for this purpose is the market-attractiveness/competitive-position mar[x.

As we saw M Chap~r 2, manages use such modds at the corpom~ level to MMcae re-

sources acm~ busmes~s, or at ~e bus~>un~ ~vd to ~gn ~sources across producN

make~. We are concerned wi~ ~e second appl~ation here.

142 Section Two

Strateg~ IssueThose i~e~ed ~ heVALS ~gme~n~heme can comNme ashort survey on heVALS Web sRe and ~s-cov~ he VALS~gment m w~ch ~ybelong.

Strategk Issue

Insight~l ~d inn~five ma~~gment~on ~ ofl~

the key m m~k~gb~a~oughs.

Resomves ~c~de all of ~e psychNog~al, phy~cN, demograpNc, and m~eriN means

consnmers have to draw on. They recede education, income, ~lf-confidence, heNth, ea-

gerness to bu> imdl~ence, and energy level~n a cont~uum ~om minimN m abundaN.

Based on these two Omen~ons, VALS 2 defines eight segmen~ that exh~R ~stinctive

behavior and decision maMng--acmalizers, fiflfillers, acNevers, experiencer~ befievers,

~rive~, makers, and ~rugg~. Claritas and similar commercial orgaNz~ns Nemify

each of the mspondems as m thek VALS type, ~emby permitt~g a ~o~mla~ific~n of

VALS type w~h the wodu~ usage and personN ~formation cd~cmd by such compaNes.

Thus, users can dmermine what each VALS segment bought, what ~ek mesa habRs are,and simil~ dam. The VALS sy~em has been further developed ~ Europe and Asia)~ Those

interested in the VALS segmem~ion scheme can complete a sho~ survey on the VALS

Web si~ (log onto http://fu¢ure.sri.eom/VALS/VALSinde~shtml) and O~ov~ theVALS segment m which ~ey bdong.

Social Class

Every sodety has Rs st~us groupings based large~ on simi~rities in income, educ~n,

and occupation.~ Because researchers have long documented the values of the various

classes, ~ is possible to in~r ce~a~ behavior concerning a given wodum. For example,

the midge Oasses ~nd to place mine va~e on education, fami~ activities, cleanliness, andbeing upqo-d~e than do ~we~dass ~milies. In the inmrn~ion~ fide one has to be care-

ful in using sod~ class as a segmentation variable since the Offerences among classes can

become ~u~e¢ as they are in the Scandinav~n countries.’~ In Americ~ many of the cri-

~fia used to define class ~atus seem to some to be no ~nger appl~aNe as the nation be-

comes incmaongly ~agmented into dozens of distinct subcultures, each with its own

unique ta~es and ambitions. As nomd ea~ieg Clarims, Inc., has ~entified 62 ~inctclasses in the U~md St~es, each with i~ own set ofbd~ and aspkations.~

O~gan&aKonal or Firm Beha~oml Descripto~w

Purchasing ~ru~ure and buying sRu~n ~gmem~ion de~fiNws are uNque to orgaN-

zationN m~kms. Purehafing structure is the degree to wNch the purcha~ng a~NRy is

cemmEzed. In such a ~rucmm ~e buyer is l~e~ to consider all transactions with a gNen

supN~r on a Nobal basis, to emphasize co~ savings, and to minimize risk. In a decen-

~aEzed situation, ~e buyer is apt to be more sen~five to the user~ nee< to emphas~e

wodum quafiU and ~ drink> and m be less cos>con~us.

The bufing sRuafion de~riNor ~c~des three N~ types of ~mations: s~a~N

mbu£ a recurring situation handled on a mm~e basis; moNfied tabu> wNch occurs when

some demem, such as price or delNery ~hedOes, has changed in a cfient-supN~r rela-

tionsNp; and a new buying fim~ which may require ~e g~hering of consN~aNe in-~rm~n and an eva~ation of Nmrn~Ne suppliers.

Innovagve Segmentadon: A Key to Marketing BreakthroughsAt the beginning of this section, we identified three o~ectives of the m~k~ ~gment~ion

process.

¯ Identify a homogeneous segment ~ Nffers ~om others.

¯ Specify crimria th~ define ~e segment.

¯ DNermine segment si~e and pmentiN.

Effective markOers, such as the creators of Nike ~Nm~ shoes, Red Bull energy drinks,

and Enterpri~ Rentm-Cag know th~ meeting these o~ectives through insNhtful and in-

nov~Ne mark~ segmentation is o~en lhe key ~ markOing breakthroughs. O~en, combi-

nations of ~ffemnt de~fipto~ are used to more pmdse~ target an aUramNe segment:

Cha~er Six ~efingA~ Ma~gm~G 143

EXHIBIT 6.5

Two broad kinds of softwa~ app~ations are used insegmenting mark,s. Data mining ap~<ations enablethe marke~r to examine a cu~omer database to ide~i~paRerns of variables that pmdi~ which cu~omem buy ordon’t bu> as well as how much they bu> CART® andMARSTM from Salfo~ Sy~ems, Inc. (www.salford-sys~ms.com) a~ two such ap~ation> Various tools forana~ng the demog~ph~ makeup of a proposed ~

get market am also av~b~. National Derision Sy~ems(www.ends.com) is one such supplier. Various analyticalprocedures in SPSS MR or other sta~s~cal software pack-ages are also useful for market segmentation purposes,

Souse: "~doW ~ MaAeting ~n~og~ S~twa~ & I~em~~. Ma~eting News, July 17, 2000. Used ~ ~rm~bn of

¯ e Amed~n Ma~ing A~od~n.

~tegk Issue

At he ~mM~n ofmany a m~km~gbmaMDough one oftenfinds an ~gN~l seg-memnon scheme ~~ ~p~ ~cu~d in ab&a~ way.

perhaps some beha~al Nmen~on mg~h~ wi~ a camful~ defined demogl’apNc groNewRNn some geogmpNc region. Genially, ~ is u~N1 m know ~e demogl’apNc prone of¯ e mNm m~km m be pursue~ even ~ ~e drN~g ~me beNnd ~e ~gmeN~n ~hemeis geogmpNcN an~or beha~orN ~ n~um, because unde~nOng the demograpNc pro-fi~ of a target m~km enabEs ~e m~k~ m be~er choose mrgemd advertiNng media oro~ markm~g commuNcation vends.

As is ~e case ~r many kinds of m~keting decision maMn~ various compme>b~eddecision suppo~ sy~ems have been developed to aid m~ke~ as ~ey wrestle with ma~k~ ~gmentation dedNons. Some wide~ used sy~ems are Nentified in ExNbR 6.5.

As several examp~s ~ this section have show~ ~ ~e ~und~n of many a m~kefingbmaMhrough one often finds an ~MgNN1 ~gmem~n ~heme %~ is sh~p~ ~cu~d ~a beha~l way. M~kem~ wi~ superior m~k~ knowledge am pmbab~ morn l~e~ ~generic the in~g~s necessary to define m~k~ ~gme~s ~ ~ese innovaNe and mean-ingful ways. Kn~hr and Bow~ma~ as runn~s ~em~N~, had the necessary m~kOknowledge to see hmv di~ance runners, as a m~km ~gment, were underserved. Thek ~-sN~, mge~ w~h ~e developmem of innovaNe pmdums and ~e c~ation of effemivem~keting programs, led the growth of the ~Nm~ ~mwe~ m~km, as consumes pu>chased ~ffem~ shoes ~r ~eir ~ffemm ~Nm~ pu~uRs, and ultim~e~ mvolutioNzed ~eaNm~ ~mwear ~dus~

CHOOSING ATTRACTIVE MARKET SEGMENTS: A FIVE-STEP PROCESS

Strategk IssueMost firms no longeraim a ~ngle pmdu~and mak~Mg programat fl~e mass make.

Moa firms no long~ Nm a sin~e produ~ and maketing program a ~e m~s make. In-

~ea¢ ~ey break ~at makm into a numb~ of homogeneous ~gmems on ~e basis of

meaNng~fl ~ffemnc~ in ~e benefits sougN by ~ffemm groups of cusmm~s. Then ~ey

~Hor produms and marketing programs m ~e partic~ deoms and idiosyncrasies of each

~gme~. But not aN segmen~ rep~sent eq~mlly am~cfi~.e opportunities for ~e firm. To

pfiorifize m~et ~gmems by ~eir po~ntiM, matkN~s must eva~ae ~eir Nmm a~ac-

tNen~s and ~dr N’m~ stren~hs and capab~Ries mhtNe m ~e ~gmems’ needs and com-

pline Mmations.

W~hin an eaaNished firm, raher than allowing each bus~ess uMt or produa manag~

to develop an approach to evaluate ~e pmentiM of alt~native mak~ ~gmems, ~ is often

be~er to app~ a common anal~ical ~amework acm~ ~gmems. WRh ~N approach, man-

ages can compare the Nmm pomntial of ~ffemm ~gmems us~g ~e same set of cri~ria

and then priorifize them to decide which ~gmems to ~rget and how resources and ma~

keting efforts should be MMcae& One riseN1 analytical Kamework manages cr emmpm-

neurs can use for this purpose is the market-attractiveness/competitive-position mar[x.

As we saw M Chap~r 2, manages use such modds at the corpom~ level to MMcae re-

sources acm~ busmes~s, or at ~e bus~>un~ ~vd to ~gn ~sources across producN

make~. We are concerned wi~ ~e second appl~ation here.

144 Section Two

Strategic IssueBofl~ m~km and com-pm~Ne perspectives am

necessar~

EXHIBIT 6.6S~ps in Con~rucfing

a MarketA~ractiven~Compefitiv~PositionM~fix ~r EvaluatingPotential Target

Mark.s

ExhibR 6.6 outhnes ~e ~cps invoNed in devdop~g a mark~Um~Nene~/

competitive~osition matrix for ana~Nng current and p~ent~l ~rget m~ke~. Undefly~g

such a m~rix is the n~ion that manages can judge ~e a~mcfiveness of a markN (its profit

potential) by examining market, competitive, end env~onmenml factors th~ may ~fluence

profitabilit~ Similafl~ they can estim~e the ~mn~h of the firmN competitive pos~ion by

Mok~g at the firmN capaNlities or shortcomings relative to the needs of the m~kN and

¯ e comp~enc~s of like~ competing. By comNMng the resuRs of these ana~ses w~h

other consecrations, ~c~ng risk, file misMon of the firm, and ethical issues (see Ethi-

cal P~spe~Ne 6.1), conclusions about which markets and mark~ segments should be pur-

sued can be reached.

The first ~eps in developing a market-attra~iveness/competitive-po~tion m~rix, then,

~e ~ identify the mo~ relevant variabks for evMuating a~ern~Ne m~k~ ~gmems and

¯ e firm~ competitive position mgard~g them and ~ w~ght each variabk in impo~ance.

No~, too, th~ Exh~R 6.6 sugges~ condu~g a forecast of futu~ changes in mark~ ~-

ffacfiveness or comp~itive portion ~ addition ~, but separ~e~ from, an as~ment of

the current Nm~n. TNs reflects the Nct that a decision to target a pa~ul~ segment is

a sff~e~c choice th~ the firm ~viU have ~ 1re wi~ for some time.

Step 1: Select Market-Attractiveness

and Compe~ve-Position Factors

An evasion of the a~racfiveness of a particu~r m~k~ or market segment and of thes~en~h of~e firm~ cu~em or po~ntiN competitive position in R b~lds nammHy on theMnd of oppo~uNty ana~sN developed ~ Chap~r 4. Manage~ can assess bo~ Nmens~nson the basis of ~formation obta~ed from ana~ses of the envkonmem, ~dus~y and com-p~itive situation, mark~ p~entiN estimnes, and cu~omer needs. To make ~ese assess-ments, they need to esmNish criteria, such as those shown ~ Exh~R 6.7, aga~ wNchWospective mark,s or m~kN segments can be ~v~uned. Both mark~ and competitivep~spe~Nes are necessar~

1. Choose c~efia ~ measure mark~

~mctiveness and ~etitive ~sition.

2. W~gh maA~ ~m~~d ~mp~e po~Uon M~o~ ~~ ~r ~five impodance.

3. Assess the curre~ position of each potenfi~target market on each facton

4. P~ ~e N~ ~ ~ ~ ma~based on ~ed ~mnm~, ~s~me~

and compline t~nds.

5. [vNu~e imN~ns ~ p~Ne ~u~changes ~r business ~ategi~ ~

resources ~qNmmen~.

C~ SN ~eting Attra~ Ma~ ~gmenG 145

Over the years, marketing manage~ have confronteda number of ethical problems relating to the selec-tion of target marke~. Problems can arise from ta~geting consumers who because of their indu~on inthe targeted group may be influenced to make deci-sions thought by some to be not in their best inte~e~. Some would argue that adverting $150 sneak-e~ to inne~c~y teenage~ is et~cal~ dubiou~ othe~that the advertising of snack foods and soft drinks tochildren is ques~ona~ In other case~ exclusion is-sues are raised because the firm~ marke~ng effo~sdo not include a particuMr grou~

In the area of indus~n issue~ adve~ise~ oken re-so~ to unde~rab~ ~ereotypes in an effo~ to simplifyadve~ising messages. These include sex-rol~ race, orage ~ereotypes. Thu~ the po~rayal of women as sexo~e~s (biMni-clad models in beer ads) o6 in general,subordinate to male authority figures is thought bymany to be dehumanizing and offen~v~ Revere se~

ism with men shown as sex o~ec~ has also been onthe increase to the dismay of some groups.

For exdu~on issue~ the concern is not only thatce~ain groups are deprived of produc~ and services

but also that they may pay more for those they do re-ceive. There is conNderab~ evidence to suppo~ the

latter claim. A survey in New York City found thatfood prices are highe~ in ne~hborhoods that canlea~ afford them. Lowqncome shoppe~ ~amily offouO paid 8.8 percent more for their groceries--S350per yean Fu~he5 inne~c~y ~ores were on averagepoorly ~ocked, had inferior food~uffg and offeredpoorer service.

Companies o~en face the ethical problem ofwhether they may exclude ce~Nn groups they wouldrather not serve. For exampl~ insurance compaNeswant only low-risk policyholders, credit-card compa-nies only low-risk cardholderg and hospitaN only pa-tients with insuranc~

Souses: N. C~ig Smith and John A. Quetc~ E~ics ~ Ma~ke~ng ~uw ~dg~ IL: Richard D. Irwin, 1993~ pp. 183-95.Reprinted wffh permission from The McG~w-HHI Compmnies; Felix M. F~edma~ "The Poor Pay Mo~ for Food in

New York, Su~ey Finds," The Wa~StreetJourna~ April 15,1991. Copyright 1991 by Dow Jones & Co., Inc. Reprinted

by permission of Dow Jones & Co., Inc. via the CopyrightClearance Centen

Market-Attractiveness Factot~

As we showed in Chapter 4, assesNng Ne a~m~Nene~ of r~arkets or market segments

involves de~rmimng the mark~ size and growth r~e and asse~g various trends--

demograpNc, soc~culmrN, economY, political/legal, ~chnNogical, and natural--th~ in-

fluence demand in that markN. An even more critical ~ctor in determiNng wh~her to

enter a new mark~ or markm se~nent, howevec is the degree to which m~m~ c~mmo"

needs, or needs that are cu~ent~ not being well serve& can be identified. In the absence

of unmet or underserved needs, ~ is likely to be difficult to win customer loyah~ regard-

less of how large the mark~ or how fa~ R is gmw~ "M~mo" products o~en Nce Nffi-

cult going in md~y~ highly comp~e mark, s.

Competitive-Position Facto~

As we showed in Chapter 4, unde~n~ng ~e a~m~Neness of the industry ~ which onecomp~es is also important. Entering a ~gment th~ wo~d place the firm ~ an una~rac-five indu~ry or ~ease its exposure ~ an una~ractive indu~ry ~ which R akeady com-p~es may not be wise. Of more immeNate and sal~nt concern, howeveg is the degree tow~ch the firm~ proposed produm emry ~to the new m~k~ or segment will be suffi~e~d~fe~ntiated from competitor, gNen the criticN success N~ors and product life<yalecon~fions already wevaknt ~ the c~egorg NmiNfl~ decision makers need to knowwhether thek firm has or will be able to acquke the resources it will take--human, finan-cial, and othe~vise--to effective~ compe~ in the new segmem. Simp~ put, mog new

144 Section Two

Strategic IssueBofl~ m~km and com-pm~Ne perspectives am

necessar~

EXHIBIT 6.6S~ps in Con~rucfing

a MarketA~ractiven~Compefitiv~PositionM~fix ~r EvaluatingPotential Target

Mark.s

ExhibR 6.6 outhnes ~e ~cps invoNed in devdop~g a mark~Um~Nene~/

competitive~osition matrix for ana~Nng current and p~ent~l ~rget m~ke~. Undefly~g

such a m~rix is the n~ion that manages can judge ~e a~mcfiveness of a markN (its profit

potential) by examining market, competitive, end env~onmenml factors th~ may ~fluence

profitabilit~ Similafl~ they can estim~e the ~mn~h of the firmN competitive pos~ion by

Mok~g at the firmN capaNlities or shortcomings relative to the needs of the m~kN and

¯ e comp~enc~s of like~ competing. By comNMng the resuRs of these ana~ses w~h

other consecrations, ~c~ng risk, file misMon of the firm, and ethical issues (see Ethi-

cal P~spe~Ne 6.1), conclusions about which markets and mark~ segments should be pur-

sued can be reached.

The first ~eps in developing a market-attra~iveness/competitive-po~tion m~rix, then,

~e ~ identify the mo~ relevant variabks for evMuating a~ern~Ne m~k~ ~gmems and

¯ e firm~ competitive position mgard~g them and ~ w~ght each variabk in impo~ance.

No~, too, th~ Exh~R 6.6 sugges~ condu~g a forecast of futu~ changes in mark~ ~-

ffacfiveness or comp~itive portion ~ addition ~, but separ~e~ from, an as~ment of

the current Nm~n. TNs reflects the Nct that a decision to target a pa~ul~ segment is

a sff~e~c choice th~ the firm ~viU have ~ 1re wi~ for some time.

Step 1: Select Market-Attractiveness

and Compe~ve-Position Factors

An evasion of the a~racfiveness of a particu~r m~k~ or market segment and of thes~en~h of~e firm~ cu~em or po~ntiN competitive position in R b~lds nammHy on theMnd of oppo~uNty ana~sN developed ~ Chap~r 4. Manage~ can assess bo~ Nmens~nson the basis of ~formation obta~ed from ana~ses of the envkonmem, ~dus~y and com-p~itive situation, mark~ p~entiN estimnes, and cu~omer needs. To make ~ese assess-ments, they need to esmNish criteria, such as those shown ~ Exh~R 6.7, aga~ wNchWospective mark,s or m~kN segments can be ~v~uned. Both mark~ and competitivep~spe~Nes are necessar~

1. Choose c~efia ~ measure mark~

~mctiveness and ~etitive ~sition.

2. W~gh maA~ ~m~~d ~mp~e po~Uon M~o~ ~~ ~r ~five impodance.

3. Assess the curre~ position of each potenfi~target market on each facton

4. P~ ~e N~ ~ ~ ~ ma~based on ~ed ~mnm~, ~s~me~

and compline t~nds.

5. [vNu~e imN~ns ~ p~Ne ~u~changes ~r business ~ategi~ ~

resources ~qNmmen~.

C~ SN ~eting Attra~ Ma~ ~gmenG 145

Over the years, marketing manage~ have confronteda number of ethical problems relating to the selec-tion of target marke~. Problems can arise from ta~geting consumers who because of their indu~on inthe targeted group may be influenced to make deci-sions thought by some to be not in their best inte~e~. Some would argue that adverting $150 sneak-e~ to inne~c~y teenage~ is et~cal~ dubiou~ othe~that the advertising of snack foods and soft drinks tochildren is ques~ona~ In other case~ exclusion is-sues are raised because the firm~ marke~ng effo~sdo not include a particuMr grou~

In the area of indus~n issue~ adve~ise~ oken re-so~ to unde~rab~ ~ereotypes in an effo~ to simplifyadve~ising messages. These include sex-rol~ race, orage ~ereotypes. Thu~ the po~rayal of women as sexo~e~s (biMni-clad models in beer ads) o6 in general,subordinate to male authority figures is thought bymany to be dehumanizing and offen~v~ Revere se~

ism with men shown as sex o~ec~ has also been onthe increase to the dismay of some groups.

For exdu~on issue~ the concern is not only thatce~ain groups are deprived of produc~ and services

but also that they may pay more for those they do re-ceive. There is conNderab~ evidence to suppo~ the

latter claim. A survey in New York City found thatfood prices are highe~ in ne~hborhoods that canlea~ afford them. Lowqncome shoppe~ ~amily offouO paid 8.8 percent more for their groceries--S350per yean Fu~he5 inne~c~y ~ores were on averagepoorly ~ocked, had inferior food~uffg and offeredpoorer service.

Companies o~en face the ethical problem ofwhether they may exclude ce~Nn groups they wouldrather not serve. For exampl~ insurance compaNeswant only low-risk policyholders, credit-card compa-nies only low-risk cardholderg and hospitaN only pa-tients with insuranc~

Souses: N. C~ig Smith and John A. Quetc~ E~ics ~ Ma~ke~ng ~uw ~dg~ IL: Richard D. Irwin, 1993~ pp. 183-95.Reprinted wffh permission from The McG~w-HHI Compmnies; Felix M. F~edma~ "The Poor Pay Mo~ for Food in

New York, Su~ey Finds," The Wa~StreetJourna~ April 15,1991. Copyright 1991 by Dow Jones & Co., Inc. Reprinted

by permission of Dow Jones & Co., Inc. via the CopyrightClearance Centen

Market-Attractiveness Factot~

As we showed in Chapter 4, assesNng Ne a~m~Nene~ of r~arkets or market segments

involves de~rmimng the mark~ size and growth r~e and asse~g various trends--

demograpNc, soc~culmrN, economY, political/legal, ~chnNogical, and natural--th~ in-

fluence demand in that markN. An even more critical ~ctor in determiNng wh~her to

enter a new mark~ or markm se~nent, howevec is the degree to which m~m~ c~mmo"

needs, or needs that are cu~ent~ not being well serve& can be identified. In the absence

of unmet or underserved needs, ~ is likely to be difficult to win customer loyah~ regard-

less of how large the mark~ or how fa~ R is gmw~ "M~mo" products o~en Nce Nffi-

cult going in md~y~ highly comp~e mark, s.

Competitive-Position Facto~

As we showed in Chapter 4, unde~n~ng ~e a~m~Neness of the industry ~ which onecomp~es is also important. Entering a ~gment th~ wo~d place the firm ~ an una~rac-five indu~ry or ~ease its exposure ~ an una~ractive indu~ry ~ which R akeady com-p~es may not be wise. Of more immeNate and sal~nt concern, howeveg is the degree tow~ch the firm~ proposed produm emry ~to the new m~k~ or segment will be suffi~e~d~fe~ntiated from competitor, gNen the criticN success N~ors and product life<yalecon~fions already wevaknt ~ the c~egorg NmiNfl~ decision makers need to knowwhether thek firm has or will be able to acquke the resources it will take--human, finan-cial, and othe~vise--to effective~ compe~ in the new segmem. Simp~ put, mog new

146 S~ion ~o O~o~Ana~

EXHIBIT 6.7 Fadors Underling Market A~racfiveness and Competitive Position

Marke~A~ene~ FacJo~

Cu~omer needs and behavior

¯ Are there unmet or unde~e~ed needs we cansa~#y?

Market or market segment size and growth rate

¯ Market potent~l in unit~ revenu~ number ofprospective cu~ome~

¯ Growth rate in unit~ revenu~ number ofprospective cu~ome~

¯ Might the target segment const~ute a pla#ormfor later expan~on into related segmen~ in themarket as a whole?

Macro trends: Are they favo~ on balance?

¯ Demog~phk

¯ Sodocu~u~l

¯ Economic

¯ P~ca~egal

¯ Techn~ogical

¯ Natural

Compe~ve-Position Factors

Oppo~un&y for compet~Ne advantage

¯ Can we differen~ate?

¯ Can we perform again~ critical success fa~o~?

Stage of compe~ng produc~ in produ~ life cyd~Is the timing dght?

Firm and compe~tor capa~l~es and resources

¯ Management ~rength and depth

¯ ~nandal and func~onal resource~ marke~n~di~dbu~o& manufactudn~ R&D, etc.

¯ B~nd image

¯ Relative market share

A~Neness of indu~ in which we would compete

¯ Threat of new entran~

¯ Threat of subs~tutes

¯ Buyer power

¯ Supplier power

¯ Compet~Ne rivalry

goods or ~r~ces need to be e~her be~er ~n a consumer point of !ew or cheap~ than¯ ose ~ey hope to ~place. Emefing a new mark~ or markN segment witho~ a source ofcompetit~e adva~age is a ~ap.

Step 2: Weight Each Factor

Ne~, a numeric~ weig~ is assigned to each ~c~r m ~c~e ~s relative importance inthe overaB ~me~. Weights ~ Phil KnigN and Bffi Bow~man migN have assignedto the m~or ~o~ ~ ExNb~ 6.7 are shown ~ Exh~ 6.8. Some users would rate eachbull~ pN~ m ExNNt 6.7 ~depende~ly, as~gNng a weig~ m each one.

Step 3: Rate Segments on Each Facto~ Plot Results on Matrices

This s~p ~q~s ~at evidence--typical~ bo~ qualitative and qua~itatNe data--be col-lec~d m o~ective~ as~ss each of~e cfi~fia identified in Stop 1. For B~e Ribbon Spw~~ 1964, ~e as~ssme~ of ~e ~afious N~ors migN have looked as shown in ExNb~ 6.8.WNle more d~a~ed e~dence ~an we N~u~ here should have been, and no doubt was,ga~e~ KnigN and Bow~man mig~ have reached ~e ~owing conc~Nons:

Marke#atWadiveness fadors

¯ Unmet cu~omer needs for l~erM smbil~ cushioning, and ~ghtw~ght shoe have beenidentified. Score: 10.

¯ The dimance runner segment is q~ smM1, though growin# but ff might lead to othersegments N the future. Score: 7.

¯ Macro Wends are ~rge~ favorable: fitness is "in~’ number of people in demographicgroups like~ to run is growing, global wade is increafing. Score: 8.

Cha~er Six ~edng A~ Ma~ ~gm~ 147

EXHIBIT 6.8 A~essing the DNtance Runnel" Market Segment in 1964

Market-a~ra~eness fa~o~

Cu~omer needs and beha~oE unmet need~

Segment size and growth rate

Macro trends

Total: Market attrac~veness

Compe~ve-po~on fa~o~

Oppo~un~y for compe~ve advantage

Capabil~es and resou~es

Indu~ attractiveness

Total: Compe~ve pos~ion

RatingWeight (0-10 Scale) Total

.5 10 5.0

.3 7 2.1

.2 8 1.6

1.0 8.7

.6 7 4.2

.2 5 1.0

.2 7 1.4

1.0 6.6

Strategk IssueCompe~g evidence¯ ~ a propo~d entry

imo a new ~gmem wNs~isfy some previouslyunmet need~ and do so~ a way ~at can bringabout sus~aNe com-petitNe advantage, iscN~d ~

Compefifiv~position favors

¯ Opportunity for competitNe advantage is somewh~ favorable; proposed shoes will be~ffe~ntiated, but shoe c~egory seems m~ure, and B~e Ribbon Spots, as a new firm,has no Wack record. Score: 7.

o Resou~es are ex~eme~ limite~ though management knows runners and di~ance run-ning; Bowerman has ~rong mpm~n. Score: 5.

¯ Five forces are Nrge~ favorable (low buyer and suppher poweL little threat of substi-tutes, ~w riv~ry amcng e~g firm~. Score: 7.

Mere ~mchNr judgments about each cfimfion are not very ~e~Ne and run the risk oftaNng ~e manag~ or ent~p~neur into a m~k~ ~gment ~at may turn o~ not ~ be ~-able. It is e~ecNl~ important to unde~ake a d~N~d ana~Ns of key competitors, espe-cial~ w~h regard m thek o~ective~ s~a~gN resource~ and m~kefing wograms. Simi-lad~ comp~lMg e!dence ~ a groposed entry ~ a new ~gment will satis~ somepm~ous~ unm~ needs, and do so ~ a way ~at can bring abo~ su~a~aNe complineadvantage, is ca~ed ~c Both qualitative and quant~Ne m~keting research msN~ aretyp~al~ u~d ~r this purpose. Once ~ese a~e~ments h~ve been made, ~e w~gMed ~-suks can be ploaed on a markel-attracliven~s/competitive-position matrN like the oneshown M Exh~ 6.9.

Step 4: Project Future Position for Each Segment

Forecasting a mark~ futu~ is more difficult than asses~ng its current state. Managers orent~pren~n~ should fir~ d~ermine ho~v the mark~ aam~Neness N lik~y to change overthe next three to five yea~. The ~arting point for this assessment is to consider possibleshifts in customer needs and behav~L the entry or exit of competitors, and changes in the~swamgies. Managers must also address several broader issues, such as posNNe changes inprodu~ or process ~chnNog~ shifts in the economic ~im~e, the impa~ of social or po-~tical Wends, and shifts in the bargNning power or vertical integration of cu~omers.

Manage~ mu~ next determine how the bu~ne~ comp~itive position ~ the mark~ islik~y to change, assuming th~ it responds effective~ to preened environmentN changesbut the firm does not unde~ake any initi~Nes requiring a change in basic ~r~egg The ex-peered changes in both mark~ aaractiveness and competitive posRion can then be plowed

146 S~ion ~o O~o~Ana~

EXHIBIT 6.7 Fadors Underling Market A~racfiveness and Competitive Position

Marke~A~ene~ FacJo~

Cu~omer needs and behavior

¯ Are there unmet or unde~e~ed needs we cansa~#y?

Market or market segment size and growth rate

¯ Market potent~l in unit~ revenu~ number ofprospective cu~ome~

¯ Growth rate in unit~ revenu~ number ofprospective cu~ome~

¯ Might the target segment const~ute a pla#ormfor later expan~on into related segmen~ in themarket as a whole?

Macro trends: Are they favo~ on balance?

¯ Demog~phk

¯ Sodocu~u~l

¯ Economic

¯ P~ca~egal

¯ Techn~ogical

¯ Natural

Compe~ve-Position Factors

Oppo~un&y for compet~Ne advantage

¯ Can we differen~ate?

¯ Can we perform again~ critical success fa~o~?

Stage of compe~ng produc~ in produ~ life cyd~Is the timing dght?

Firm and compe~tor capa~l~es and resources

¯ Management ~rength and depth

¯ ~nandal and func~onal resource~ marke~n~di~dbu~o& manufactudn~ R&D, etc.

¯ B~nd image

¯ Relative market share

A~Neness of indu~ in which we would compete

¯ Threat of new entran~

¯ Threat of subs~tutes

¯ Buyer power

¯ Supplier power

¯ Compet~Ne rivalry

goods or ~r~ces need to be e~her be~er ~n a consumer point of !ew or cheap~ than¯ ose ~ey hope to ~place. Emefing a new mark~ or markN segment witho~ a source ofcompetit~e adva~age is a ~ap.

Step 2: Weight Each Factor

Ne~, a numeric~ weig~ is assigned to each ~c~r m ~c~e ~s relative importance inthe overaB ~me~. Weights ~ Phil KnigN and Bffi Bow~man migN have assignedto the m~or ~o~ ~ ExNb~ 6.7 are shown ~ Exh~ 6.8. Some users would rate eachbull~ pN~ m ExNNt 6.7 ~depende~ly, as~gNng a weig~ m each one.

Step 3: Rate Segments on Each Facto~ Plot Results on Matrices

This s~p ~q~s ~at evidence--typical~ bo~ qualitative and qua~itatNe data--be col-lec~d m o~ective~ as~ss each of~e cfi~fia identified in Stop 1. For B~e Ribbon Spw~~ 1964, ~e as~ssme~ of ~e ~afious N~ors migN have looked as shown in ExNb~ 6.8.WNle more d~a~ed e~dence ~an we N~u~ here should have been, and no doubt was,ga~e~ KnigN and Bow~man mig~ have reached ~e ~owing conc~Nons:

Marke#atWadiveness fadors

¯ Unmet cu~omer needs for l~erM smbil~ cushioning, and ~ghtw~ght shoe have beenidentified. Score: 10.

¯ The dimance runner segment is q~ smM1, though growin# but ff might lead to othersegments N the future. Score: 7.

¯ Macro Wends are ~rge~ favorable: fitness is "in~’ number of people in demographicgroups like~ to run is growing, global wade is increafing. Score: 8.

Cha~er Six ~edng A~ Ma~ ~gm~ 147

EXHIBIT 6.8 A~essing the DNtance Runnel" Market Segment in 1964

Market-a~ra~eness fa~o~

Cu~omer needs and beha~oE unmet need~

Segment size and growth rate

Macro trends

Total: Market attrac~veness

Compe~ve-po~on fa~o~

Oppo~un~y for compe~ve advantage

Capabil~es and resou~es

Indu~ attractiveness

Total: Compe~ve pos~ion

RatingWeight (0-10 Scale) Total

.5 10 5.0

.3 7 2.1

.2 8 1.6

1.0 8.7

.6 7 4.2

.2 5 1.0

.2 7 1.4

1.0 6.6

Strategk IssueCompe~g evidence¯ ~ a propo~d entry

imo a new ~gmem wNs~isfy some previouslyunmet need~ and do so~ a way ~at can bringabout sus~aNe com-petitNe advantage, iscN~d ~

Compefifiv~position favors

¯ Opportunity for competitNe advantage is somewh~ favorable; proposed shoes will be~ffe~ntiated, but shoe c~egory seems m~ure, and B~e Ribbon Spots, as a new firm,has no Wack record. Score: 7.

o Resou~es are ex~eme~ limite~ though management knows runners and di~ance run-ning; Bowerman has ~rong mpm~n. Score: 5.

¯ Five forces are Nrge~ favorable (low buyer and suppher poweL little threat of substi-tutes, ~w riv~ry amcng e~g firm~. Score: 7.

Mere ~mchNr judgments about each cfimfion are not very ~e~Ne and run the risk oftaNng ~e manag~ or ent~p~neur into a m~k~ ~gment ~at may turn o~ not ~ be ~-able. It is e~ecNl~ important to unde~ake a d~N~d ana~Ns of key competitors, espe-cial~ w~h regard m thek o~ective~ s~a~gN resource~ and m~kefing wograms. Simi-lad~ comp~lMg e!dence ~ a groposed entry ~ a new ~gment will satis~ somepm~ous~ unm~ needs, and do so ~ a way ~at can bring abo~ su~a~aNe complineadvantage, is ca~ed ~c Both qualitative and quant~Ne m~keting research msN~ aretyp~al~ u~d ~r this purpose. Once ~ese a~e~ments h~ve been made, ~e w~gMed ~-suks can be ploaed on a markel-attracliven~s/competitive-position matrN like the oneshown M Exh~ 6.9.

Step 4: Project Future Position for Each Segment

Forecasting a mark~ futu~ is more difficult than asses~ng its current state. Managers orent~pren~n~ should fir~ d~ermine ho~v the mark~ aam~Neness N lik~y to change overthe next three to five yea~. The ~arting point for this assessment is to consider possibleshifts in customer needs and behav~L the entry or exit of competitors, and changes in the~swamgies. Managers must also address several broader issues, such as posNNe changes inprodu~ or process ~chnNog~ shifts in the economic ~im~e, the impa~ of social or po-~tical Wends, and shifts in the bargNning power or vertical integration of cu~omers.

Manage~ mu~ next determine how the bu~ne~ comp~itive position ~ the mark~ islik~y to change, assuming th~ it responds effective~ to preened environmentN changesbut the firm does not unde~ake any initi~Nes requiring a change in basic ~r~egg The ex-peered changes in both mark~ aaractiveness and competitive posRion can then be plowed

148 SecOon Two Oppo~unityAnalys~

EXHIBIT 6.9Mar~A~racfiven~Compefifiv~Pos~on

MarketA~racUveness

H~h(8-I~

Mod~_~ I

Low

Low

Oompan~s Competitive Pos~on

¯ = Ma~ attm~ and comp~ve po~on ~ ~s~nce ~nne~ segme~

Moderate High

(4-7) (8-10)

on the matrix N the form ofa vedor to refleG the Nrecfion and magnitude of~e expe~edchanges. Antic~ating such changes may be impodant N today~ In~rn~ age.

S~ategic IssueM~age~ ~ouN co~sN~ a m~k~ ~gmemm be a deskab~ targdoNy ~ ~ is s~on~ypoMfive on at lea~ onecf &e two ~menMons

of m~kd ~adNen~sand p~e~ial ~mpeti-tNe poNfion and ~ ~tmoderate~ positive on

¯ e othec

Step 5: Choose Segments to Targe~ Allocate ResourcesManagers should consNer a m~kd ~gment m be a des~aNe ~rgd on~ ~ ~ is ~rong~poshNe on ~ ~a~ one of the two ~mens~ns of markd a~dNeness and pmentiM com-pd~Ne posit~n a~d ~ ~a~ moderate~ positNe on ~e cthe~ In ExMbit 6.9, this Ndudesm~k~s posk~ned in any of ~e th~ze cells in the upper dgN-hand corner of ~e matrix.HoweveK a buMness may decide to m~er a m~kd &~ currently ~Hs into one of the mid-d~ cdN under these condNons: (1) managers beheve th~ &e m~kd~ a~mdNeness orthe# competitNe s~en~h is like~ to improve over the next ~w yea~; (2) they see suchmark,s as ~eppNg-~ones to emedng large~ more attmdNe m~kds in the future; or (3)shared co~s or synergies ~e present, &ereby benefitNg anther e~rb

The markd-a~racfivenesdcompetitNe poMfion matrix offe~ genial guidance fors~e~c oNectives and allocation of resources for segments cu~e~ targ~ed and sug-ge~s which new se#nents m enma Thus, fl can also be use~tl, especNl~ under chan#ngm~kd condit~ns, for asking m~k~s cr m~kd se#nents #om wNch ~ wi~draw orto wh~h allocations of resource& financial and othe~vise, might be reduced. Exhibk 6.10summa~zes gene~c guiddines for str~e~c o~ectives and resource allocations for m~k~sin each of the m~rix cells.

DIFFERENT TARGETING STRATEGIES SUITDIFFERENT OPPORTUNITIES

S~egic IssueM~t ~s~l ~tre-N~euriN ~nm~s~rgN ~owly definedm~k~ ~gmems.

Mo~ snccessful eutrepreneurial ventures mlgO na~ow~ defined markO segments ~ the

outseL as Od Ph~ Knight and Bill Bowerman, for two reasons. One, doing so puts the

nascent firm in pos~ion to achieve early success in a market segmem that ~ unders~nds

part~ular~ well. Secon& such a sff~egy conserves prec~us msource~ both financial and

~herwise. But segmenting the mark~ into na~mv niches and th~a choo~ng one Nche to

~tg~ is not always the beg s~eg> pal’t~Oarly for e~aNNhed firms having substantiM

resourcem Three common mrg~g stra~es are niehomarkeK mas~market, and

grow{h-markO str~e~es.

Chapter Six ~rgedng A~cfive Market Segmen~ 149

EXHIBIT 6.10 Im~kafio~ ofA~ernafive Pos~ons wi~ the Ma~e#AO~ONenesdCompe~N~Pofifion Matrix

~r Ta~et Mark~ Selectiom ~c O~fi~ and R~ou~e Al~fion

Comp~ve ~osition

Weak Medium Strong

High

Medium

B~ ~ DESIRABLE POTEN~AL TARGET DESIRABLE POTEN~AL TARGET¯ Sped~e a~und limi~d Inve~ ~ build: Prote~ ~sition:str~ ¯ Ch~nge ~r ~ade~p ¯ Inve~ ~ g~w ~ ma~mum

¯ Seek ways to ove~ome ¯ Bu~ se~v~y on ~mn~Ps ~ge~Me r~eweaknesses ¯ R~n~me v~nemMe areas ¯ C~rate on m~

¯ W~aw ff i~ons ~ ~n~h~naMe g~h a~~cNng

Umited expan~on or harveY: Manage ~r ear~ng~ DESIRABLE POTEN~AL TARGET¯ Look for ways to expand w~hout ¯ P~ exi~ing ~n~hs B~d s~e~v~F

high dsk; otherwise, minim~e ¯ Inve~ ~ imp~ve posRbn ¯ Emphasize profitab,~ Winve~ment and focus operations on~ in a~as whe~ dsk is bw i~a~ng p~du~M~

¯ Build up abilky to counter~mpetit~

D~est: Manage ~r eam~gs: Prote~ and r~ocus:¯ Sell when possible to ¯ Prote~ position ¯ D~end streng~s

ma~m~e cash v~ue ¯ M~m~e inve~me~ ¯ Seek ways ~ increase cu~e~¯ Meantime, cut fixed costs and e~ngs ~o~ speeding

avdd fu~her ~vestment maAet’s ded~e

Sources: Adapt~ ~om Geo~e S. Da5 Ana(rsis./br Sn~teg~ Market D~on~ St. P~I: \Ve~ I ~ ~ 20~ £’ 198& Reprinted by permission. S. Z R~son, R K ~m~,

~d ~ R \Vad~ The Directional Policy MaN~ To~ ~r Strat~k PNnni~2 L~ Range Phmning 11 ( 1978L ~. ~15. © 1~ Reprinted by ~rmission.

Niche-Market Strategy

This ~ra~gy involves serving one or more segments that, while not the larges~ consist ofsubsmntN1 numbers of cu~omers seeking somewhat-special~ed benefits ~om a grodud crservice. Such a s~ategy is designed to avoid direct compNition ~vith larger firms that arepursuing the bigger segments. For example, overNl coffee consumption N down in somecountries, but the saks of gourmet coffees in coffee ba~ such as Starbucks have boomedin recent years.

Mass-Market Strategy

A bu~n~s can ptrsue a ma~-m~k~ ~gy ~ two ways. ~rst, ~ can igno~ any ~gment~ft~nces and des~n a s~e pmdu~n~m~k~g program ~ wiU ~ppe~ m ~eNrge~ numb~ of consumes. The primary o~e~ of ~N ~m~gy is m capture suffidemvo~me to g~n econmn~s of scak and a co~ advamage. TNs s~amgy requires substantiNresources, ~c~ng production capacity, and good mass-m~keting capaN1N~. Conse-quentl> R is ~vored by N~er companies or bu~ness unRs or by those who~ p~em co>potation pm~d~ sttbstantiN suppo~. For examNe, when Honda fi~t en~md the Ameri-can and European motorcycle m~kms, R m~med Oe Ngh¢o~me ~gment con~sting ofbuye~ of Mw-NspNcemem, low,riced cycles. Honda subsequem~ u~d ~e sNes vdumeand scale economies R acNeved ~ that ma~-m~k~ segment to he~ R expand intosmNleg mw~specNfized ~gmems of ~e m~km.

A second approach to the mass m~km is to deign ~p~e produms and m~kefingprograms ~r ~e ~ffering ~gments. TNs is often cNkd ~fferentiaed markefinD For

148 SecOon Two Oppo~unityAnalys~

EXHIBIT 6.9Mar~A~racfiven~Compefifiv~Pos~on

MarketA~racUveness

H~h(8-I~

Mod~_~ I

Low

Low

Oompan~s Competitive Pos~on

¯ = Ma~ attm~ and comp~ve po~on ~ ~s~nce ~nne~ segme~

Moderate High

(4-7) (8-10)

on the matrix N the form ofa vedor to refleG the Nrecfion and magnitude of~e expe~edchanges. Antic~ating such changes may be impodant N today~ In~rn~ age.

S~ategic IssueM~age~ ~ouN co~sN~ a m~k~ ~gmemm be a deskab~ targdoNy ~ ~ is s~on~ypoMfive on at lea~ onecf &e two ~menMons

of m~kd ~adNen~sand p~e~ial ~mpeti-tNe poNfion and ~ ~tmoderate~ positive on

¯ e othec

Step 5: Choose Segments to Targe~ Allocate ResourcesManagers should consNer a m~kd ~gment m be a des~aNe ~rgd on~ ~ ~ is ~rong~poshNe on ~ ~a~ one of the two ~mens~ns of markd a~dNeness and pmentiM com-pd~Ne posit~n a~d ~ ~a~ moderate~ positNe on ~e cthe~ In ExMbit 6.9, this Ndudesm~k~s posk~ned in any of ~e th~ze cells in the upper dgN-hand corner of ~e matrix.HoweveK a buMness may decide to m~er a m~kd &~ currently ~Hs into one of the mid-d~ cdN under these condNons: (1) managers beheve th~ &e m~kd~ a~mdNeness orthe# competitNe s~en~h is like~ to improve over the next ~w yea~; (2) they see suchmark,s as ~eppNg-~ones to emedng large~ more attmdNe m~kds in the future; or (3)shared co~s or synergies ~e present, &ereby benefitNg anther e~rb

The markd-a~racfivenesdcompetitNe poMfion matrix offe~ genial guidance fors~e~c oNectives and allocation of resources for segments cu~e~ targ~ed and sug-ge~s which new se#nents m enma Thus, fl can also be use~tl, especNl~ under chan#ngm~kd condit~ns, for asking m~k~s cr m~kd se#nents #om wNch ~ wi~draw orto wh~h allocations of resource& financial and othe~vise, might be reduced. Exhibk 6.10summa~zes gene~c guiddines for str~e~c o~ectives and resource allocations for m~k~sin each of the m~rix cells.

DIFFERENT TARGETING STRATEGIES SUITDIFFERENT OPPORTUNITIES

S~egic IssueM~t ~s~l ~tre-N~euriN ~nm~s~rgN ~owly definedm~k~ ~gmems.

Mo~ snccessful eutrepreneurial ventures mlgO na~ow~ defined markO segments ~ the

outseL as Od Ph~ Knight and Bill Bowerman, for two reasons. One, doing so puts the

nascent firm in pos~ion to achieve early success in a market segmem that ~ unders~nds

part~ular~ well. Secon& such a sff~egy conserves prec~us msource~ both financial and

~herwise. But segmenting the mark~ into na~mv niches and th~a choo~ng one Nche to

~tg~ is not always the beg s~eg> pal’t~Oarly for e~aNNhed firms having substantiM

resourcem Three common mrg~g stra~es are niehomarkeK mas~market, and

grow{h-markO str~e~es.

Chapter Six ~rgedng A~cfive Market Segmen~ 149

EXHIBIT 6.10 Im~kafio~ ofA~ernafive Pos~ons wi~ the Ma~e#AO~ONenesdCompe~N~Pofifion Matrix

~r Ta~et Mark~ Selectiom ~c O~fi~ and R~ou~e Al~fion

Comp~ve ~osition

Weak Medium Strong

High

Medium

B~ ~ DESIRABLE POTEN~AL TARGET DESIRABLE POTEN~AL TARGET¯ Sped~e a~und limi~d Inve~ ~ build: Prote~ ~sition:str~ ¯ Ch~nge ~r ~ade~p ¯ Inve~ ~ g~w ~ ma~mum

¯ Seek ways to ove~ome ¯ Bu~ se~v~y on ~mn~Ps ~ge~Me r~eweaknesses ¯ R~n~me v~nemMe areas ¯ C~rate on m~

¯ W~aw ff i~ons ~ ~n~h~naMe g~h a~~cNng

Umited expan~on or harveY: Manage ~r ear~ng~ DESIRABLE POTEN~AL TARGET¯ Look for ways to expand w~hout ¯ P~ exi~ing ~n~hs B~d s~e~v~F

high dsk; otherwise, minim~e ¯ Inve~ ~ imp~ve posRbn ¯ Emphasize profitab,~ Winve~ment and focus operations on~ in a~as whe~ dsk is bw i~a~ng p~du~M~

¯ Build up abilky to counter~mpetit~

D~est: Manage ~r eam~gs: Prote~ and r~ocus:¯ Sell when possible to ¯ Prote~ position ¯ D~end streng~s

ma~m~e cash v~ue ¯ M~m~e inve~me~ ¯ Seek ways ~ increase cu~e~¯ Meantime, cut fixed costs and e~ngs ~o~ speeding

avdd fu~her ~vestment maAet’s ded~e

Sources: Adapt~ ~om Geo~e S. Da5 Ana(rsis./br Sn~teg~ Market D~on~ St. P~I: \Ve~ I ~ ~ 20~ £’ 198& Reprinted by permission. S. Z R~son, R K ~m~,

~d ~ R \Vad~ The Directional Policy MaN~ To~ ~r Strat~k PNnni~2 L~ Range Phmning 11 ( 1978L ~. ~15. © 1~ Reprinted by ~rmission.

Niche-Market Strategy

This ~ra~gy involves serving one or more segments that, while not the larges~ consist ofsubsmntN1 numbers of cu~omers seeking somewhat-special~ed benefits ~om a grodud crservice. Such a s~ategy is designed to avoid direct compNition ~vith larger firms that arepursuing the bigger segments. For example, overNl coffee consumption N down in somecountries, but the saks of gourmet coffees in coffee ba~ such as Starbucks have boomedin recent years.

Mass-Market Strategy

A bu~n~s can ptrsue a ma~-m~k~ ~gy ~ two ways. ~rst, ~ can igno~ any ~gment~ft~nces and des~n a s~e pmdu~n~m~k~g program ~ wiU ~ppe~ m ~eNrge~ numb~ of consumes. The primary o~e~ of ~N ~m~gy is m capture suffidemvo~me to g~n econmn~s of scak and a co~ advamage. TNs s~amgy requires substantiNresources, ~c~ng production capacity, and good mass-m~keting capaN1N~. Conse-quentl> R is ~vored by N~er companies or bu~ness unRs or by those who~ p~em co>potation pm~d~ sttbstantiN suppo~. For examNe, when Honda fi~t en~md the Ameri-can and European motorcycle m~kms, R m~med Oe Ngh¢o~me ~gment con~sting ofbuye~ of Mw-NspNcemem, low,riced cycles. Honda subsequem~ u~d ~e sNes vdumeand scale economies R acNeved ~ that ma~-m~k~ segment to he~ R expand intosmNleg mw~specNfized ~gmems of ~e m~km.

A second approach to the mass m~km is to deign ~p~e produms and m~kefingprograms ~r ~e ~ffering ~gments. TNs is often cNkd ~fferentiaed markefinD For

150 Sec~on Two

examp~, Marrio~ and EuropeN Accor do this wRh thdr various hotd chNns. Althoughsuch a ~r~egy can generic more sa~s than an un~fferentiated s~eg~ k also ~creasesco~s in produ~ deign, manufacturing, inventory, and marketing, espec~l~ promotion.

Growth-Market StrategyBu~ne~es pursu~g a growth-market s~egy often ~rget one or more ~st-growth seg-ments, even though ~ey may not cur~ntly be very Nrge. R is a s~egy often favored bysmaH~ compNRors 1o ~vNd ~ confrontations with Nrgel firms wNle b~lNng v~umeand share. Mo~ venture capkN fit’ms invest on~ ~ firms pu~ng growth-market ~ra~-g~s, because doing so N the oNy way ~ey can earn the 30 pement to 60 p~cent annuNrates of return on inve~ment th~ they seek for portfofio companies. Such a ~mmgy usu-N~ req~s ~rong R&D and m~kN~g capaNlities to identify and develop produ~s ap-pearing to new~ emerNng user segments, plus the resources to finance rapid growth. ThewoNem, howevec is lh~ ~ growth, if susmine~ a~rac~ Nrge competitors. TNs h~p-pened to Apple when IBM enmred the pe~onN computer business. The goN of the earlyenfant N to have devdoped an enduring competitive position via ks products, serv~e, N~tribution, and ccs~ by the time comp~ors enter.

GLOBAL MARKET SEGMENTATION

St~tegic Issue

The tradit~nal ~woachto NobN m~kN seg-memafion has been to

v~w a cou~w or agroup of cou~fi~ ~ as~Oe ~gme~ compfi~ing NI consumes. TNs~pm~h ~ ~fio~flawe~

The tradit~nal approach ~ ~obN m~km segmenta~n has been m v~w a country cr agroup of countries as a ~n~e segment compiling N1 consumers. This approach ~ seri-ously flawed because R reEes on country vafiaNes r~her than consum~ beha~og assumeshomogeneky wiNN the coumry segmem, and ignores the po~ilky of the e~smnce ofhomogeneous groups of consumes aovss country segments.~7

More and more compames ~e approacNng NobN mark~ segmentation by attempting~ identify consumers wkh ~mH~ needs and wants reflexed ~ lhek beha!or ~ ~e mar-ke~ce ~ a range of co~nn’ies. TNs ~temoun~y segmem~n enaNes a company m de-veMp masonab~ ~and~zed programs requiring li~k change across locN marke~, therebyresulting ~ scale economies. Star TV~ launch of a Pan-AMan s~dl~e tele!Mon servkebroadcasting throughout AsN ~ En~ish and CNnese is an examp~ of such a s~eg>~

There are many reasons--beyond mere ambitions m grow--why companies expand ~-mrn~naH~ Some compaNes go internationN ~ de~nd thdr home position aga~NobN compmkors who ~e constantly Mok~g for vulnerabilit> For example, C~el’NHagthrough a joint venture with MitsuNshi Heavy Industries, has for the past 30 yea~ made asubstantiM inve~ment in Japan to deny ks Japanese compO~og Komatsu, s~en~h ~home, thereby ~king away ks profit sanctuar> Had Cat not been successful in doing so,Komatsu wood have been aNe m compe~ more aggm~Ne~ wkh C~, n~ only in ~eUnited States but also ~ o~er m~or world markets.~

Another reason a firm may go overseas and ~rg~ a specific country is to service cus-~mers who are Nso engag~g ~ ~obN expansion. In recent yea~ Japanese automobHecompaNes that have crewed U.S. manuNcturing Ncilities have encouraged some of thdrpa~s suppliers m do the same. Fkms Nso enter overseas markms to earn fom~n exchangean& ~ some cases, are subsNked by %ek governments m do so.

In generN, with the exception of these s~eNc spec~l ckcum~ances, the se~n ofoverseas ~rgm markets follows essentiN~ the same patterns as for domestic m~kms, N-though gNen the magNtude of economic, sodal, and pohficN change in the world mda>compaNes ~e pay~g consN~ab~ more attention m political risk.

MarketingPlan Exercise

Etadnotes

Chapter Six ~rgedng A~cfive Manet Segmen~ 151

1. E~en~ve manta ~gme~ation ~ a relative~ m~ phenomenon. Until abo~ ~e mMd~ of ~cenmw many firms offered a s~g~ ~a~c pmdum aimed ~ ~e emke m~s markm ~uch ~ Coc>Cola or Le! jeanO. But ~ m~m years many N-ms~ncluding ~du~fiM goods manuNcmm~and ~ produ~ as web as con~m~ products companies have begun segmenting the~m~ke~ and devdop~g Nffem~ produc~ and maN~g programs ~ed ~ N~?m~ seg-me~s. WNch env~onme~M changes have he~ed ~k ~is increased interest M m~k~ seg-mentation? Wh~ advam~g~ ~ bene~s can a firm gMn ffmn pmgefly ~gmemmg its markm?

2. Exactly whN N the relationship between m~k~ ~gmeNatiom m~ m~ket~ and po~fion~g?Wh~ damage \vi~ be done ~ a company~ targN maNN~g and positioMng efforts ffm~ke~ ~e~co~ectly ~ n~ effe~Ne~ ~ ~NgNN~y ~gmemec?

3. Can m~ket ~gme~Mn be ~ken ~o NW Wh~ ~e ~e pomntiM ~dva~ag~ of ove~eD

me~g a m~k~? Wh~ ~r~egy reign a firm pu~ue wlmn ~ befieves th~ the mark~ has beenbroken i~o too many small ~gment~

4. What N the ~?mnce between a ~’owN-market ~eting strategy and a niche targeting sgategy?

Wha capabilN~ or s~engths ~oOd a bu~ness possess to imp~me~ a grmvth-maNet targetings~egy effe~Ne~?

AdNtionN ~lgNagno~ questions to ~ your aN~y m app~ ~e anMyticN mrs and conceNs inthN chap~r ~ stra~oc decision maMng may be ~und at the bookN Web site at ww~v.mhhe.com/walk~O&

1.In~rmation to prepare this section was taken ~om ~e N~e, ~c., Web ske at ~mm~nikeb~co,d

sto~y/chmnashtm# w~nikebiz.com/s~o,~_bfigh~shtm# u~m~nikebiz.comis~o~_bow~an.

shm~# and nnmanike.com/nikebiz/nmvs/p~ssreleasejhmd?year=2OO2&monN 02&&U~=h.

2.Joseph P~e H, Ba~ Vi~og and Andrew C. Boy~on, ~ ~e article "MaMng M~s Cu~om~afion

WoN$’ Ha~wff Bz~hwss Revimg SeNembm~Oc~ber 1993, pp. 108 19, dNcuss stone of ~ewoNems invoNed ~ ~e imNeme~ation of a NgNy ~gmeme¢ customized ~r~eg~

3.David Welch, "Q&A wi~ ~GM~ M~k Hogan: Buil&to-Order N Sti~ ~e End Game... It Takes

Om a Lot of~e Cost," Bt~N~sWeek Onlin< M~ch 26, 2001.

4.NMA WIRELESS--Silver mxtersg New Media Age, Ncvemb~ 28, 2002, p. 35.

5."S~ce for Women]’ NorN ~1~ News, Oc~b~ 1~ 2001, p. 20.

6.M~k Levee, "The $19N50 Phone$’ New ~ Times, De~mb~ 1, 2002, p. 66.

7.Jean HN1Na~ "Semor Survey: NnNng Down the Numb~s: Aummakers AuemN to Quami~

Thek Sham of~e M~ket," Adve~Tisi~gAge, D~emb~ 2, 2002, p. 50.

8.M~a Som~nd~m, "UN-M~ Inc.~ SmN1 Town S~aegy ~r Conven~nce Stores Is Paying

Off," The lYa~ Street Jom~al, Novemb~ 20, 1995, p. B5A; Tom Dochat, "UN-Marts Ponde~ OD

fions$’ Han’isbmg Pao4o< Novemb~ 5, 2002, p. D02.

9.Jon Go~, "We Know Who You Are and We Know Where You LNe: The ~s~ume~M RafionM-

iw of Geodemo~aph~s7 Econom~ Geography 71, no. 2 (1995), p. 171.

10.JeanMarc P~h~> "Iris Opens Ey~ m Ge~a~g," ~’ec~n Market,g, Sep~mb~ 27, 2002,

p. 9.

11.MMmd Arndt, "Quak~ O~s Is Thirs~ for Even More Ga~mde HRs,’ ~mmeN~Nes~veekcond

Nvda&,/&~ash/feb2OOO/~!~O2<htm, February 2, 2000.

150 Sec~on Two

examp~, Marrio~ and EuropeN Accor do this wRh thdr various hotd chNns. Althoughsuch a ~r~egy can generic more sa~s than an un~fferentiated s~eg~ k also ~creasesco~s in produ~ deign, manufacturing, inventory, and marketing, espec~l~ promotion.

Growth-Market StrategyBu~ne~es pursu~g a growth-market s~egy often ~rget one or more ~st-growth seg-ments, even though ~ey may not cur~ntly be very Nrge. R is a s~egy often favored bysmaH~ compNRors 1o ~vNd ~ confrontations with Nrgel firms wNle b~lNng v~umeand share. Mo~ venture capkN fit’ms invest on~ ~ firms pu~ng growth-market ~ra~-g~s, because doing so N the oNy way ~ey can earn the 30 pement to 60 p~cent annuNrates of return on inve~ment th~ they seek for portfofio companies. Such a ~mmgy usu-N~ req~s ~rong R&D and m~kN~g capaNlities to identify and develop produ~s ap-pearing to new~ emerNng user segments, plus the resources to finance rapid growth. ThewoNem, howevec is lh~ ~ growth, if susmine~ a~rac~ Nrge competitors. TNs h~p-pened to Apple when IBM enmred the pe~onN computer business. The goN of the earlyenfant N to have devdoped an enduring competitive position via ks products, serv~e, N~tribution, and ccs~ by the time comp~ors enter.

GLOBAL MARKET SEGMENTATION

St~tegic Issue

The tradit~nal ~woachto NobN m~kN seg-memafion has been to

v~w a cou~w or agroup of cou~fi~ ~ as~Oe ~gme~ compfi~ing NI consumes. TNs~pm~h ~ ~fio~flawe~

The tradit~nal approach ~ ~obN m~km segmenta~n has been m v~w a country cr agroup of countries as a ~n~e segment compiling N1 consumers. This approach ~ seri-ously flawed because R reEes on country vafiaNes r~her than consum~ beha~og assumeshomogeneky wiNN the coumry segmem, and ignores the po~ilky of the e~smnce ofhomogeneous groups of consumes aovss country segments.~7

More and more compames ~e approacNng NobN mark~ segmentation by attempting~ identify consumers wkh ~mH~ needs and wants reflexed ~ lhek beha!or ~ ~e mar-ke~ce ~ a range of co~nn’ies. TNs ~temoun~y segmem~n enaNes a company m de-veMp masonab~ ~and~zed programs requiring li~k change across locN marke~, therebyresulting ~ scale economies. Star TV~ launch of a Pan-AMan s~dl~e tele!Mon servkebroadcasting throughout AsN ~ En~ish and CNnese is an examp~ of such a s~eg>~

There are many reasons--beyond mere ambitions m grow--why companies expand ~-mrn~naH~ Some compaNes go internationN ~ de~nd thdr home position aga~NobN compmkors who ~e constantly Mok~g for vulnerabilit> For example, C~el’NHagthrough a joint venture with MitsuNshi Heavy Industries, has for the past 30 yea~ made asubstantiM inve~ment in Japan to deny ks Japanese compO~og Komatsu, s~en~h ~home, thereby ~king away ks profit sanctuar> Had Cat not been successful in doing so,Komatsu wood have been aNe m compe~ more aggm~Ne~ wkh C~, n~ only in ~eUnited States but also ~ o~er m~or world markets.~

Another reason a firm may go overseas and ~rg~ a specific country is to service cus-~mers who are Nso engag~g ~ ~obN expansion. In recent yea~ Japanese automobHecompaNes that have crewed U.S. manuNcturing Ncilities have encouraged some of thdrpa~s suppliers m do the same. Fkms Nso enter overseas markms to earn fom~n exchangean& ~ some cases, are subsNked by %ek governments m do so.

In generN, with the exception of these s~eNc spec~l ckcum~ances, the se~n ofoverseas ~rgm markets follows essentiN~ the same patterns as for domestic m~kms, N-though gNen the magNtude of economic, sodal, and pohficN change in the world mda>compaNes ~e pay~g consN~ab~ more attention m political risk.

MarketingPlan Exercise

Etadnotes

Chapter Six ~rgedng A~cfive Manet Segmen~ 151

1. E~en~ve manta ~gme~ation ~ a relative~ m~ phenomenon. Until abo~ ~e mMd~ of ~cenmw many firms offered a s~g~ ~a~c pmdum aimed ~ ~e emke m~s markm ~uch ~ Coc>Cola or Le! jeanO. But ~ m~m years many N-ms~ncluding ~du~fiM goods manuNcmm~and ~ produ~ as web as con~m~ products companies have begun segmenting the~m~ke~ and devdop~g Nffem~ produc~ and maN~g programs ~ed ~ N~?m~ seg-me~s. WNch env~onme~M changes have he~ed ~k ~is increased interest M m~k~ seg-mentation? Wh~ advam~g~ ~ bene~s can a firm gMn ffmn pmgefly ~gmemmg its markm?

2. Exactly whN N the relationship between m~k~ ~gmeNatiom m~ m~ket~ and po~fion~g?Wh~ damage \vi~ be done ~ a company~ targN maNN~g and positioMng efforts ffm~ke~ ~e~co~ectly ~ n~ effe~Ne~ ~ ~NgNN~y ~gmemec?

3. Can m~ket ~gme~Mn be ~ken ~o NW Wh~ ~e ~e pomntiM ~dva~ag~ of ove~eD

me~g a m~k~? Wh~ ~r~egy reign a firm pu~ue wlmn ~ befieves th~ the mark~ has beenbroken i~o too many small ~gment~

4. What N the ~?mnce between a ~’owN-market ~eting strategy and a niche targeting sgategy?

Wha capabilN~ or s~engths ~oOd a bu~ness possess to imp~me~ a grmvth-maNet targetings~egy effe~Ne~?

AdNtionN ~lgNagno~ questions to ~ your aN~y m app~ ~e anMyticN mrs and conceNs inthN chap~r ~ stra~oc decision maMng may be ~und at the bookN Web site at ww~v.mhhe.com/walk~O&

1.In~rmation to prepare this section was taken ~om ~e N~e, ~c., Web ske at ~mm~nikeb~co,d

sto~y/chmnashtm# w~nikebiz.com/s~o,~_bfigh~shtm# u~m~nikebiz.comis~o~_bow~an.

shm~# and nnmanike.com/nikebiz/nmvs/p~ssreleasejhmd?year=2OO2&monN 02&&U~=h.

2.Joseph P~e H, Ba~ Vi~og and Andrew C. Boy~on, ~ ~e article "MaMng M~s Cu~om~afion

WoN$’ Ha~wff Bz~hwss Revimg SeNembm~Oc~ber 1993, pp. 108 19, dNcuss stone of ~ewoNems invoNed ~ ~e imNeme~ation of a NgNy ~gmeme¢ customized ~r~eg~

3.David Welch, "Q&A wi~ ~GM~ M~k Hogan: Buil&to-Order N Sti~ ~e End Game... It Takes

Om a Lot of~e Cost," Bt~N~sWeek Onlin< M~ch 26, 2001.

4.NMA WIRELESS--Silver mxtersg New Media Age, Ncvemb~ 28, 2002, p. 35.

5."S~ce for Women]’ NorN ~1~ News, Oc~b~ 1~ 2001, p. 20.

6.M~k Levee, "The $19N50 Phone$’ New ~ Times, De~mb~ 1, 2002, p. 66.

7.Jean HN1Na~ "Semor Survey: NnNng Down the Numb~s: Aummakers AuemN to Quami~

Thek Sham of~e M~ket," Adve~Tisi~gAge, D~emb~ 2, 2002, p. 50.

8.M~a Som~nd~m, "UN-M~ Inc.~ SmN1 Town S~aegy ~r Conven~nce Stores Is Paying

Off," The lYa~ Street Jom~al, Novemb~ 20, 1995, p. B5A; Tom Dochat, "UN-Marts Ponde~ OD

fions$’ Han’isbmg Pao4o< Novemb~ 5, 2002, p. D02.

9.Jon Go~, "We Know Who You Are and We Know Where You LNe: The ~s~ume~M RafionM-

iw of Geodemo~aph~s7 Econom~ Geography 71, no. 2 (1995), p. 171.

10.JeanMarc P~h~> "Iris Opens Ey~ m Ge~a~g," ~’ec~n Market,g, Sep~mb~ 27, 2002,

p. 9.

11.MMmd Arndt, "Quak~ O~s Is Thirs~ for Even More Ga~mde HRs,’ ~mmeN~Nes~veekcond

Nvda&,/&~ash/feb2OOO/~!~O2<htm, February 2, 2000.

152 Se~ion ~o O~o~A~

12. Salah S. Haman and Lea E K~afi~ "Ident~cation of G~bN Consum~ Segments: A Beha!oml

FramewoNY Jomwd oflnterna#onM Consumer Marketing 3, no. 2 (1991), p. 16.

13.From ~rm~n prov~ed by ~an~N Resea~h In~R~e.

14.The reline weigN of ~e vary across coumfi~. In Chin~ ~r examNe, more weigN is gNen

to occup~n and education, whe~ Western countries emph~e re~denc~ ~com~ and Nm-

i~ background. See John D. Darien and Lee H. Radebaug~ Nte~wationM Dim~tsi~ of Co~

ten&ot~w Nte~wational Bt~N~s (Boron: PWS-Kent, 1993), p. 136.

15. ~mon M~o, "InternationN Marketing--the M~or Issue~’ in The Marke~ Book, M~ha~ L

Bakec ed. (Oxfor~ EnNand: Bu~eavo~H~nemann, 1992), p. 430.

16.Ned Gl~coc~ ’~eo~e Profile~y The Neu~ & Obs~v~: Decemb~ 6, 2000.

17.H~n and K~afis, "Identification of GlobM Consum~ Segmemsy p. 16.

18. Henry Laurenc~ Michael K Yoshino, and Peter Williamso~ STAR TV (A) (Bosto~ Ha~d Busi-ness SchoN Publishing, 1994).

19.Dou~ Lamo~, Winning Worldwide (Burr Ridge, IL: BuNness One Irwin, 1991), pp. 59-69.

Differentiation and PositioningFast Food Turns Healthy

Them am many masons why consumers around theworld have made the fas>food indu~ one of theworld~ fastest growing over the pa~ four decades,but healthy ea~ng isn’t one of them. At lea~, notuntil Subwa~ the u~quRous Ame~can sandwichchain, decided in the late 1990s that its downscaleimage had to go. Subway had grown from a singlestore in 1965 to a na~onwide chain of stores whosesales volume had long since surpa~ed $1 billion.But it was known more for its belly-busting foo>long sandwiches and i~ gaudy yellow dOcor thanfor anything else. Subway needed a makeover--anew positioning in the ma~etplace--somethingthat would distingu~h Subway from its fa> andsuga~pu~e~ng competitor.

The Jared Diet

Fo~uRous~ for Subwa~ at about the same time asthe company decided to remake its image byadding some healthier sandwiches, a rotund col-lege student at Indiana University who happenedto live next door to the local Subway ouget de-cided that getting winded by dragging his 425-pound body across campus wasn~ much fun. JamdFogle, a mgu~r cu~omer of the Subway ~om, sawthe new healthier sandwiches--less than seveng~ms of fat, the signs proclaimed--and decided itwas time to go on a diet. For lunch, it would be asi>inch turke> no mayo, no oil, and hold thecheese, please. For dinneE a footlong veggie sub, abag of baked potato chips, and a diet beve~ge.

The other element in his we~ht-loss ~tegywas walking. No more riding the campus bus. Nomore ~evato~. "Walking was the ke>" said Fogle."1 walked an average of 1.5 miles a da~ five days

a week. It may not sound like a lot, but it sure wasbe~er than what I was doing." A year latec he wasdown to 180 pounds on his 6-foo>2-inch f~me.An editor at the ~udent newspaper wrote aboutJamd~ feat, the national media picked up the~ory, and before long Fogle was Subway%spokesman--"Jam~ the Subway Gu~"

ReposRioning Fuels Subway~ Growth

To mfle~ the new positioning, the ~oms’ inlefio~were updated. The dated g~phics de~cting theNew York CiW subway sy~em were dumped, andimages of fresh tomatoes and other vegetables tooktheir place. New heart-healthy sandwiches and,latec At~ns-friendly wraps--bowing to the growingpopu~rity of the carbohydrate-controlled Atkinsdiet--were ingoduced. And Jamd went on a na-

~onal tou~ appea~ng in morn than two dozen hea~walks a yea~ as well as on talk shows everywhere.

Subwayg new image as a place where you couldget healthy fast food and all the hoopla that Jamdgenerated paid the chain and its kanch~ees atwofold dividend. It helped stores grow their sales,as concerns over obesity became a compilingpublic health issue at the dawn of the new millen-nium. And it enticed mo~ people to sign up asf~nchgees and open new Subway ~oms, in theUnited States and abroad. The msul~?

In 2001 Subway surpassed McDonaM~ as themo~ ubiqu~ous fas>food ope~tor in the UnitedStates, with 13,247 stores at yea~end, opening904 ~oms in 2001 to McDonaMg 295. Now theworld~ large~ submarine sandwich chain, Subwayby mid-2004 had mo~ than 21,000 ~oms in 75countries.

153

152 Se~ion ~o O~o~A~

12. Salah S. Haman and Lea E K~afi~ "Ident~cation of G~bN Consum~ Segments: A Beha!oml

FramewoNY Jomwd oflnterna#onM Consumer Marketing 3, no. 2 (1991), p. 16.

13.From ~rm~n prov~ed by ~an~N Resea~h In~R~e.

14.The reline weigN of ~e vary across coumfi~. In Chin~ ~r examNe, more weigN is gNen

to occup~n and education, whe~ Western countries emph~e re~denc~ ~com~ and Nm-

i~ background. See John D. Darien and Lee H. Radebaug~ Nte~wationM Dim~tsi~ of Co~

ten&ot~w Nte~wational Bt~N~s (Boron: PWS-Kent, 1993), p. 136.

15. ~mon M~o, "InternationN Marketing--the M~or Issue~’ in The Marke~ Book, M~ha~ L

Bakec ed. (Oxfor~ EnNand: Bu~eavo~H~nemann, 1992), p. 430.

16.Ned Gl~coc~ ’~eo~e Profile~y The Neu~ & Obs~v~: Decemb~ 6, 2000.

17.H~n and K~afis, "Identification of GlobM Consum~ Segmemsy p. 16.

18. Henry Laurenc~ Michael K Yoshino, and Peter Williamso~ STAR TV (A) (Bosto~ Ha~d Busi-ness SchoN Publishing, 1994).

19.Dou~ Lamo~, Winning Worldwide (Burr Ridge, IL: BuNness One Irwin, 1991), pp. 59-69.

Differentiation and PositioningFast Food Turns Healthy

Them am many masons why consumers around theworld have made the fas>food indu~ one of theworld~ fastest growing over the pa~ four decades,but healthy ea~ng isn’t one of them. At lea~, notuntil Subwa~ the u~quRous Ame~can sandwichchain, decided in the late 1990s that its downscaleimage had to go. Subway had grown from a singlestore in 1965 to a na~onwide chain of stores whosesales volume had long since surpa~ed $1 billion.But it was known more for its belly-busting foo>long sandwiches and i~ gaudy yellow dOcor thanfor anything else. Subway needed a makeover--anew positioning in the ma~etplace--somethingthat would distingu~h Subway from its fa> andsuga~pu~e~ng competitor.

The Jared Diet

Fo~uRous~ for Subwa~ at about the same time asthe company decided to remake its image byadding some healthier sandwiches, a rotund col-lege student at Indiana University who happenedto live next door to the local Subway ouget de-cided that getting winded by dragging his 425-pound body across campus wasn~ much fun. JamdFogle, a mgu~r cu~omer of the Subway ~om, sawthe new healthier sandwiches--less than seveng~ms of fat, the signs proclaimed--and decided itwas time to go on a diet. For lunch, it would be asi>inch turke> no mayo, no oil, and hold thecheese, please. For dinneE a footlong veggie sub, abag of baked potato chips, and a diet beve~ge.

The other element in his we~ht-loss ~tegywas walking. No more riding the campus bus. Nomore ~evato~. "Walking was the ke>" said Fogle."1 walked an average of 1.5 miles a da~ five days

a week. It may not sound like a lot, but it sure wasbe~er than what I was doing." A year latec he wasdown to 180 pounds on his 6-foo>2-inch f~me.An editor at the ~udent newspaper wrote aboutJamd~ feat, the national media picked up the~ory, and before long Fogle was Subway%spokesman--"Jam~ the Subway Gu~"

ReposRioning Fuels Subway~ Growth

To mfle~ the new positioning, the ~oms’ inlefio~were updated. The dated g~phics de~cting theNew York CiW subway sy~em were dumped, andimages of fresh tomatoes and other vegetables tooktheir place. New heart-healthy sandwiches and,latec At~ns-friendly wraps--bowing to the growingpopu~rity of the carbohydrate-controlled Atkinsdiet--were ingoduced. And Jamd went on a na-

~onal tou~ appea~ng in morn than two dozen hea~walks a yea~ as well as on talk shows everywhere.

Subwayg new image as a place where you couldget healthy fast food and all the hoopla that Jamdgenerated paid the chain and its kanch~ees atwofold dividend. It helped stores grow their sales,as concerns over obesity became a compilingpublic health issue at the dawn of the new millen-nium. And it enticed mo~ people to sign up asf~nchgees and open new Subway ~oms, in theUnited States and abroad. The msul~?

In 2001 Subway surpassed McDonaM~ as themo~ ubiqu~ous fas>food ope~tor in the UnitedStates, with 13,247 stores at yea~end, opening904 ~oms in 2001 to McDonaMg 295. Now theworld~ large~ submarine sandwich chain, Subwayby mid-2004 had mo~ than 21,000 ~oms in 75countries.

153

STRATEGIC CHALLENGES ADDRESSED IN CHAPTER 7

Strategk IssueThe po~fioNng deri-sion is a s~eNc one,~vi~ implicat~ns ~cton~ ~r how ~e firm~goods or serv~esshoNd be dedgne¢ bmaim ~r deve~Dng ~eotlmr demems of ~em~kefing s~egg

As the Subway exalnp~ ~s~es, the success of a product offered to a gNen target ma>ket depends on how well R is posR~ned wi%in th~ market segment--that is, how well ~p~forms ~wNtive to competitive offerings and to ~e needs of the ~rget audience. Po~-fioning (or mpo~fion~N ~ the case of Subway) rears to both the place a pl’odu~ or brandoccupies M cu~omers’ minds relative to thek needs and competing produc~ or brands andm the m~k~el’~ ded~on maMng intended m creae such a pos~ion. Thus, ~e positioningnotion comprises bmh competitive and cu~omer need con~derafions.

Portioning ~ ba~cally concerned with ~ffemntiation. Ries and Trout, who popOarizedthe concept of positioning, v~w R as a creative undertaking whereby an existing brand inan ov~crowded mark~place of ~milar brands can be gNen a ~Ne posRion in theminds of t~gmed prospers. WN~ ~ek concept was concerned with an existing bran ~is equN~ appl~ab~ for new produ~s.~ While typ~ally thought of in relation to the ma>kefing of consumer goods, ~ has equal vNue for indu~riN goods and for ser~ces, wNchrequire esseNiN~ the same procedure as consumer goods? Because services are charac-mrized by ~ek iman~bifity, perishabiliW, consumer participation ~ thek delN~> and thesimultaneous na~m of thek production and consumptio~ they are more ~fficOt for ma>keters m position successfldly, not~vithstanding SubwayN success.

In Chapter 7, we rake the final ~ep in preparing the foundation on which effective ma>kefing programs are based. Dmw~g on dedoons made about target mark,s, as discussedin Chapter 6, we address the cfificN question, "How shoOd a bu~ness position its productoffering--whether goods cr services--so cu~om~s in the mrgN markm pemeNe tt~e o9~ring as pro~d~g the benefits they seek, thereby gNing the product an adva~age overcu~ent and p~entN1 future compmim~?" As we shall see, ~e positioNng decision is a~rme~c one, wRh imitations not oNy for how the firm~ goods or ser%ces should be de-~gne¢ but also for devdop~g the ~hel" dements of the marking ~mmg> Pfic~g deci-sions, promotion ded~on~ and decisions about how ~e product is to be OStl-ibuted a~ fol-low ~om, and comfibute m the effectivene~ og the positioNng of the pmdum in Rscomp~RNe space. Thus, ~e m~iN ~ tNs chapt~ provides a foundation for ~rtual~ allof the ~r~eg~ decision mak~g that fo~ows ~ ~e b£ance of tNs book.

DIFFERENTIATION: ONE KEY TO CUSTOMER PREFERENCE

AND COMPETITIVE ADVAN~GE

Why do cu~omers we~r one product over another? In today~ highly competitive mark, s,

consumers have numerous opt~ns. They can choose ~om dozens of best-selling novels to

rake along on an upcoming vacation. They can buy the novel they choose from an onfine

merchant such as Amazon.corn, ~om large chain booksel~ such as Barnes and Noble or

the~ online counterpa~s, ~om book clubs, ~om a ~cN bookstore, or in some cases ~om

their nearby supermark~ or mass merchant. They can even borrow the book at their local

l~rary and not buy R at all! Wh~her ~ goods such as books or ser~ces such as l~rafies,

consumers make choices such as these nearly every day. In mo~ cases, consumers or o~

ganizational customers choose wh~ they buy for one of two reasons: wh~ they choose is

be~o; in some sense, or cheape~: In ~ther case, the good or serv~e they choose is, in some

wa~ almo~ Nways d~fe~vnt from others they could have chosen.Differentiation is a powerful theme in developing busine~ Stl’~e~es, as wall as in mar-

keting. As M~had Po~er points out, "A company can outperform its rivals on~ ff R can

e~aNNh a Nfference th~ ~ can preserve. ~ mu~ ddiver gre~er value to customers or cre-

Strategk IssueDi~?mntiation is whypeople bu~

Strategic IssueCma~g boN phy~cNand p~cepmN Nffe>ences is wh~ effe~NepositioNng seeks toaccomNish.

EXHIBIT 7.1Ge~ric Competiti~

~ra~es

S~t~z’~ A~p~d wi~ Ne per-nfis~on of~e Free Pm~, aDivision of Smmn & SchusterAdOt PuNi~mg Gmu~ ~omCompeti~ A~’antage: Oeating

and ~m~h~ ~perior Pel~flol~

mance by M~h~l Pome~Cop~N © 1985, 1998 byM~ E. Poge~

Chapter Seven Differentiation and Po~tion~g 155

~e cmnp~aNe va~e a a lmv~ co~, or both?" Mo~ of the time, ~fferentiation is whypeople bu> They buy ~e lam~ Jolm Grisham novel because they know it will be a page-turnec N~mnt ~om %e last Grisham ~ey rea< and hard to pm down. They buy R ~omAmazon.corn because ~ey Maow Amazon~ selection is enol’mou~ and ~s onmd~k o>d~ing sy~em takes oNy a minum. Or they buy it ~om ~ae megasmm because it~ fun tobrowse there or ~om thek ~cal bookseller because they ~el good about supposing theirlocal merchants. They buy it at the superm~k~ because ~ convenient. All these book-~Hing stla~es are ~ffemnt, and they appeN m ~ffemm consumes (i.e., Nffemnt ma>ket segmemO at Nffemnt points in time, for Offemnt book-bu~ng purposes. If theses~eNes ~d not var£ consumers would have no reason to use some of ~em, and ~eywould buy ~dr books where they were cheapest or mo~ conveinent, though even in sucha case, the cheaper pricing or gm~er conveNence wouN gill con~itum Nffermmes.

Dffferen~a~on in Business Strategies

Michael Po~er~ das~c book on competitive advamage idemified ~e generic str~e~es:cost leade~h~, Offemntiation, and focus, as shown in ExNb~ 7.1 .s These ~r~eg~s, wNchOffer in the scope of the target markN and market needs ~ey serve (broad or narrow com-pmifive scope) and on whmh~ they base their competitNe advamage on low cost 0owerprices m Oe cusmm~ for equNa~nt products) or Nffemntiation (pmdums tha ~e supe-rior on some impo~am Omens~nO mpmsem ~stinctly Nffemnt ways in which compaNescan comp~e for the minds and wNlms of cu~omers in thdr ~rg~ m~kms. Po~er arguesthat the wor~ ~r~egy is to be %tuck in the mN~e]’ to be nether Nfferent nor lower incost than one~ competitors. Compaines in such a position offer cu~omers 1Rtle reason notto take thek business dsewh~e. But cu~om~s don’t real~ buy s~eNes. They buy spe-cific goods and services and effective execut~n: on4ime ddNer> proper inmNhtion, re-sponsNe cusmm~ ser~ce, and so on. Thus, s~egy is imp~mented ~ the product markmlevel, where ~ffemntiation lies at the heart of positioning.

Dffferen~a~on among Goods and ServicesAs we saw in ~e pm!ous chapmg cu~om~s in one m~k~ ~gmem have wa~s and needs~a ~ffer in rome way from ~ose of customers in ~her ~gments. PosNomng allows ~em~k~ to rake advaNage of and be msponsNe to such Offemnces and position pa~u-lar goods and services so as to bmmr m~t ~e nee~ of consumes in one w m~e of~e~gmems. These Nffemnc~ are o~en phyNcal. NikeN original wane sole was such a dig~mnce, as we ~w in Chapmr 6. But Offemnces can alto be p~ceNuN, as ~vi~ NNeN laterwoduc~ N~ benefi~d ~om end~mems by John McEnroe, M~had Jordan, and other~mous afl~etes. Creating boN physical and p~ceptuN ~ffemnc~, using all the dememsof the m~keting mix--product, pficin~ promotion, and ~fibution decisions--~ wh~effe~ive positioning seeks to ~compli~.

Compe~ve Broad TargetScope

Narrow Target

Lower Cost

Co~ Leade~hip~gy

Focus ~gy(Cos~Based)

Diffe~n~a~on

~ffe~n~a~on~gy

Focus ~gy

STRATEGIC CHALLENGES ADDRESSED IN CHAPTER 7

Strategk IssueThe po~fioNng deri-sion is a s~eNc one,~vi~ implicat~ns ~cton~ ~r how ~e firm~goods or serv~esshoNd be dedgne¢ bmaim ~r deve~Dng ~eotlmr demems of ~em~kefing s~egg

As the Subway exalnp~ ~s~es, the success of a product offered to a gNen target ma>ket depends on how well R is posR~ned wi%in th~ market segment--that is, how well ~p~forms ~wNtive to competitive offerings and to ~e needs of the ~rget audience. Po~-fioning (or mpo~fion~N ~ the case of Subway) rears to both the place a pl’odu~ or brandoccupies M cu~omers’ minds relative to thek needs and competing produc~ or brands andm the m~k~el’~ ded~on maMng intended m creae such a pos~ion. Thus, ~e positioningnotion comprises bmh competitive and cu~omer need con~derafions.

Portioning ~ ba~cally concerned with ~ffemntiation. Ries and Trout, who popOarizedthe concept of positioning, v~w R as a creative undertaking whereby an existing brand inan ov~crowded mark~place of ~milar brands can be gNen a ~Ne posRion in theminds of t~gmed prospers. WN~ ~ek concept was concerned with an existing bran ~is equN~ appl~ab~ for new produ~s.~ While typ~ally thought of in relation to the ma>kefing of consumer goods, ~ has equal vNue for indu~riN goods and for ser~ces, wNchrequire esseNiN~ the same procedure as consumer goods? Because services are charac-mrized by ~ek iman~bifity, perishabiliW, consumer participation ~ thek delN~> and thesimultaneous na~m of thek production and consumptio~ they are more ~fficOt for ma>keters m position successfldly, not~vithstanding SubwayN success.

In Chapter 7, we rake the final ~ep in preparing the foundation on which effective ma>kefing programs are based. Dmw~g on dedoons made about target mark,s, as discussedin Chapter 6, we address the cfificN question, "How shoOd a bu~ness position its productoffering--whether goods cr services--so cu~om~s in the mrgN markm pemeNe tt~e o9~ring as pro~d~g the benefits they seek, thereby gNing the product an adva~age overcu~ent and p~entN1 future compmim~?" As we shall see, ~e positioNng decision is a~rme~c one, wRh imitations not oNy for how the firm~ goods or ser%ces should be de-~gne¢ but also for devdop~g the ~hel" dements of the marking ~mmg> Pfic~g deci-sions, promotion ded~on~ and decisions about how ~e product is to be OStl-ibuted a~ fol-low ~om, and comfibute m the effectivene~ og the positioNng of the pmdum in Rscomp~RNe space. Thus, ~e m~iN ~ tNs chapt~ provides a foundation for ~rtual~ allof the ~r~eg~ decision mak~g that fo~ows ~ ~e b£ance of tNs book.

DIFFERENTIATION: ONE KEY TO CUSTOMER PREFERENCE

AND COMPETITIVE ADVAN~GE

Why do cu~omers we~r one product over another? In today~ highly competitive mark, s,

consumers have numerous opt~ns. They can choose ~om dozens of best-selling novels to

rake along on an upcoming vacation. They can buy the novel they choose from an onfine

merchant such as Amazon.corn, ~om large chain booksel~ such as Barnes and Noble or

the~ online counterpa~s, ~om book clubs, ~om a ~cN bookstore, or in some cases ~om

their nearby supermark~ or mass merchant. They can even borrow the book at their local

l~rary and not buy R at all! Wh~her ~ goods such as books or ser~ces such as l~rafies,

consumers make choices such as these nearly every day. In mo~ cases, consumers or o~

ganizational customers choose wh~ they buy for one of two reasons: wh~ they choose is

be~o; in some sense, or cheape~: In ~ther case, the good or serv~e they choose is, in some

wa~ almo~ Nways d~fe~vnt from others they could have chosen.Differentiation is a powerful theme in developing busine~ Stl’~e~es, as wall as in mar-

keting. As M~had Po~er points out, "A company can outperform its rivals on~ ff R can

e~aNNh a Nfference th~ ~ can preserve. ~ mu~ ddiver gre~er value to customers or cre-

Strategk IssueDi~?mntiation is whypeople bu~

Strategic IssueCma~g boN phy~cNand p~cepmN Nffe>ences is wh~ effe~NepositioNng seeks toaccomNish.

EXHIBIT 7.1Ge~ric Competiti~

~ra~es

S~t~z’~ A~p~d wi~ Ne per-nfis~on of~e Free Pm~, aDivision of Smmn & SchusterAdOt PuNi~mg Gmu~ ~omCompeti~ A~’antage: Oeating

and ~m~h~ ~perior Pel~flol~

mance by M~h~l Pome~Cop~N © 1985, 1998 byM~ E. Poge~

Chapter Seven Differentiation and Po~tion~g 155

~e cmnp~aNe va~e a a lmv~ co~, or both?" Mo~ of the time, ~fferentiation is whypeople bu> They buy ~e lam~ Jolm Grisham novel because they know it will be a page-turnec N~mnt ~om %e last Grisham ~ey rea< and hard to pm down. They buy R ~omAmazon.corn because ~ey Maow Amazon~ selection is enol’mou~ and ~s onmd~k o>d~ing sy~em takes oNy a minum. Or they buy it ~om ~ae megasmm because it~ fun tobrowse there or ~om thek ~cal bookseller because they ~el good about supposing theirlocal merchants. They buy it at the superm~k~ because ~ convenient. All these book-~Hing stla~es are ~ffemnt, and they appeN m ~ffemm consumes (i.e., Nffemnt ma>ket segmemO at Nffemnt points in time, for Offemnt book-bu~ng purposes. If theses~eNes ~d not var£ consumers would have no reason to use some of ~em, and ~eywould buy ~dr books where they were cheapest or mo~ conveinent, though even in sucha case, the cheaper pricing or gm~er conveNence wouN gill con~itum Nffermmes.

Dffferen~a~on in Business Strategies

Michael Po~er~ das~c book on competitive advamage idemified ~e generic str~e~es:cost leade~h~, Offemntiation, and focus, as shown in ExNb~ 7.1 .s These ~r~eg~s, wNchOffer in the scope of the target markN and market needs ~ey serve (broad or narrow com-pmifive scope) and on whmh~ they base their competitNe advamage on low cost 0owerprices m Oe cusmm~ for equNa~nt products) or Nffemntiation (pmdums tha ~e supe-rior on some impo~am Omens~nO mpmsem ~stinctly Nffemnt ways in which compaNescan comp~e for the minds and wNlms of cu~omers in thdr ~rg~ m~kms. Po~er arguesthat the wor~ ~r~egy is to be %tuck in the mN~e]’ to be nether Nfferent nor lower incost than one~ competitors. Compaines in such a position offer cu~omers 1Rtle reason notto take thek business dsewh~e. But cu~om~s don’t real~ buy s~eNes. They buy spe-cific goods and services and effective execut~n: on4ime ddNer> proper inmNhtion, re-sponsNe cusmm~ ser~ce, and so on. Thus, s~egy is imp~mented ~ the product markmlevel, where ~ffemntiation lies at the heart of positioning.

Dffferen~a~on among Goods and ServicesAs we saw in ~e pm!ous chapmg cu~om~s in one m~k~ ~gmem have wa~s and needs~a ~ffer in rome way from ~ose of customers in ~her ~gments. PosNomng allows ~em~k~ to rake advaNage of and be msponsNe to such Offemnces and position pa~u-lar goods and services so as to bmmr m~t ~e nee~ of consumes in one w m~e of~e~gmems. These Nffemnc~ are o~en phyNcal. NikeN original wane sole was such a dig~mnce, as we ~w in Chapmr 6. But Offemnces can alto be p~ceNuN, as ~vi~ NNeN laterwoduc~ N~ benefi~d ~om end~mems by John McEnroe, M~had Jordan, and other~mous afl~etes. Creating boN physical and p~ceptuN ~ffemnc~, using all the dememsof the m~keting mix--product, pficin~ promotion, and ~fibution decisions--~ wh~effe~ive positioning seeks to ~compli~.

Compe~ve Broad TargetScope

Narrow Target

Lower Cost

Co~ Leade~hip~gy

Focus ~gy(Cos~Based)

Diffe~n~a~on

~ffe~n~a~on~gy

Focus ~gy

,I

156 Se~ion ~o ~n~ A~lysis

PHYSICAL POSITIONING

~k IssueA s~p~ ~mp~mnof oMy ~e physical di-menMo~ of aRernafive

o~ u~al~ doesnot p~ide a ~m~ep~e ~ ~

~s~

One way to assess the current posflion of a pmdu~ offering relative to compmflo~ is onthe basis of how the various offerings compare on some s~ of o~ective physic~ charac-mrisfics. For example, an article ~ The fK¢H Sower Jomwal Nscu~ed the introduction ofXC90, Volvo~ fi~t entry in the very profitable spots utility vehicle (SUV) segment in theUn~ed St~es. R compared the XC90 with modds from the competing luxury brands,BMW, Mercedes-Ben~ Acum, and Ford. R compared the models on en~n~ho~epowecwdght, tmving capacR> mikage, and price ~ee Exhibit 7.2)? In many cases a physical po-sitioning ana~sg can provide useful ~formation to a marketing manageg particuNfly inthe early stages of identifying and design~g new product offerings.

Despim being based primari~ on ~cl’m~N r~her than on markm d~a, physical com-parisons can be an e~entN1 step in unde~aking a posRioning anNy~s. This is espedN~~ue with the competitive offerings of many industriN goods and service~ wNch buye~typ~ evaN~e large~ on the basis of such charac~ristics. In add~ion, ~ contributes toa b~er markm~R&D inter~ce by d~elmining key phys~M product chara~efi~s;he~s define the ~ructure of compOition by revealing the degree to wNch the variousbrands compae with one another; and may inOcae the presence of meaNngful produOgaps 0he lack of products having ce~Nn desked physical chara~efisticO, which, in turn,may reveal oppo~un~s for a new produa entry

I_im~a~ons of Physical PositioningA simp~ comparison of only ~e phy~cal ~mens~ns of a~ern~e offerings usuM~ does

not pro!de a complNe p~ture of relaive positions because, as we nomd eafliec position-

ing ultimate~ occu~ in cusmm~s’ minds. Even though a produO~ phy~cal ch~acmris-

tics, package, brand name, price, and ancillary services can be deigned to acNeve a pa>

t~Oar position ~ ~e marka, cu~om~s may a~ach less impo~ance to some of ~ese

chaac~ristics ~an, or peEeNe them ~ffemnt~ from, what the firm expect. Also, cus-

tomers’ a~itudes mwad a produ~ am often based cn sodN or psychologicN attr~utes not

amenaNe to oNective compaNon, such as perceptions of the produa~ ae~hetic appeal,

sportiness, or aatus image (for examp~, in the UNmd Stores, French wine has ~adkion-

al~ been thought of as very expensNe or as an accompaniment to French foo~. Conse-

quemly, perceptu~ positioning analys~--wh~her aimed ~ ~scovering oppo~unities fornew product entries or eva~ating and a~u~g the poskion of a current offering~s crib

ical~ important.

EXHIBIT 7.2 2003 Vo~o XC90 ~. O~ AIPWh~PDr~e SUVs

Towing

Base Price Weight CapacRy EPA Mileage

Make/Mod~ (USD) En~ne/Ho~epower (pound~ (pound~ (City/H~hway}

Volvo XC90 2.5T AWD $35,100 5-cylJ208 ~450 5,000 18/24

BMW X5 3.0 $39,500 6<ylJ225 ~533 6,000 1 ~20

Mercede~Benz $36,950 VU232 4,819 5,000 1 ~18

ML350

Acura MDX $35,700 V7~60 ~420 ~500 17~3

Ford Explorer $3~785 V6/210 ~434 5,380 1 ~20

Som~ I~H Street ~ Ea~n E&ficn ~ff ~odu~d ~py onl~ by J~Mn Welsh. Copyright ~ ~ Dow Jon~ & Co., ~c, Rewod~ ~ p~mission & Dow~n~ & C~ ~ ~ ~e ~rm~ ~book !a Copyfig~ CD~a~e Ceme~

Chapter Seven Differentiation and Po~tion~g 157

PERCEPTUAL POSITIONING

Consumers often know very little about the essential physical a~mes of many produc~,

especial~ household products, and even if ~ey di& they would not understand the physi-

cal aHributes well enough to use lhem as a basis for choosing between cmnp~A~e offe>

ings. (For the m~or ~fferences b~ween physical and pemepmal product pos~ioning

analyses, see Exhib~ 7.3.) Many consumers do not want to be bothered about a product~

phyMcal charac~stics because they are not buying these physical prope~s but raher the

benefits they provide. While the physical prope~s of a produ~ ce~n~ influence fire

benefits provide~ a consumer can typical~ evaluae a product be~er m~ the basis of wha

~ does than what it is. Thus, for example, a headache remedy may be judged on hmv

quickly K brings rehe~ a ~hpa~e on the freshness of breafl~ pro~de~ a beer on its taste,

and a vehic~ on how comfo~ab~ it rides.The eva~ation of many products is su~ecfive because it is ~fluenced by favors other

than physical properties, inOu~ng the way produc~ are pmsente~ our past experiences

with them, and the opinions of other. Thus, phy~cal~ ~mHar producB may be pemeived

as being different because of ~fferent histories, names, and advertis~g camp~gns. For ex-

amp~, some people will pay conMderab~ more for Bayer aspirin than for an unadve~ed

priv~e label aspirin even though they are essentiM~ the same product.

LEVERS MARKETERS CAN USE TO ESTABLISH POSITIONING

Customers or prospective customers perceive some physical as well as other differences

between goods or services w~hin a product caegorE of course. Marketiug decision mak-

ers seeldng to win a particular position in cu~omers’ minds will seek to endow their prod-

uct with various kinds of attributes, which may be camgorized as follows:

Simple plo~sical~v based am4bute~ These are directly related to a single phy~cal di-

menfion such as qualR> poweg or size. While there may be a direct correspondence be-

tween a phys~al dimenfion and a perceptual a~fibute, an analysis of consumers’ pe~

cepfion of products on these attributes may unveil phenomena of intele~ to a marketing~rateg~ For in~ance, two cars with estimated gasofine mileage of 23.2 and 25.8 miles

per gallon may be perceived as having ~m~ar gasofine consumption.

EXHIBIT 7.3

Physical Positioning

¯ Technical oHenta~on

¯ Physical characteH~ks

¯ O~ectNe measures

¯ Data readily av~e

¯ Physical brand properties

¯ Large number of dimen~ons

¯ Represents impact of product specs

¯ Dire~t R&D im~a~ons

Comparison of Phyfical and P~p~N Pofifio~ng Ana~s

P~ce~u~ Pos~o~ng

¯ Consumer oHenta~on

¯ Pe~eptual attributes

¯ Pe~e~ual measu~s

¯ Need for ma~ing research

¯ Pe~eptual brand p~o~ and positio~ng intens~ies

¯ UmKed number of ~men~o~

¯ Represents impa~ of p~du~ ~e~ and commu~on

¯ R&D im~katio~ need to be i~e~d

,I

156 Se~ion ~o ~n~ A~lysis

PHYSICAL POSITIONING

~k IssueA s~p~ ~mp~mnof oMy ~e physical di-menMo~ of aRernafive

o~ u~al~ doesnot p~ide a ~m~ep~e ~ ~

~s~

One way to assess the current posflion of a pmdu~ offering relative to compmflo~ is onthe basis of how the various offerings compare on some s~ of o~ective physic~ charac-mrisfics. For example, an article ~ The fK¢H Sower Jomwal Nscu~ed the introduction ofXC90, Volvo~ fi~t entry in the very profitable spots utility vehicle (SUV) segment in theUn~ed St~es. R compared the XC90 with modds from the competing luxury brands,BMW, Mercedes-Ben~ Acum, and Ford. R compared the models on en~n~ho~epowecwdght, tmving capacR> mikage, and price ~ee Exhibit 7.2)? In many cases a physical po-sitioning ana~sg can provide useful ~formation to a marketing manageg particuNfly inthe early stages of identifying and design~g new product offerings.

Despim being based primari~ on ~cl’m~N r~her than on markm d~a, physical com-parisons can be an e~entN1 step in unde~aking a posRioning anNy~s. This is espedN~~ue with the competitive offerings of many industriN goods and service~ wNch buye~typ~ evaN~e large~ on the basis of such charac~ristics. In add~ion, ~ contributes toa b~er markm~R&D inter~ce by d~elmining key phys~M product chara~efi~s;he~s define the ~ructure of compOition by revealing the degree to wNch the variousbrands compae with one another; and may inOcae the presence of meaNngful produOgaps 0he lack of products having ce~Nn desked physical chara~efisticO, which, in turn,may reveal oppo~un~s for a new produa entry

I_im~a~ons of Physical PositioningA simp~ comparison of only ~e phy~cal ~mens~ns of a~ern~e offerings usuM~ does

not pro!de a complNe p~ture of relaive positions because, as we nomd eafliec position-

ing ultimate~ occu~ in cusmm~s’ minds. Even though a produO~ phy~cal ch~acmris-

tics, package, brand name, price, and ancillary services can be deigned to acNeve a pa>

t~Oar position ~ ~e marka, cu~om~s may a~ach less impo~ance to some of ~ese

chaac~ristics ~an, or peEeNe them ~ffemnt~ from, what the firm expect. Also, cus-

tomers’ a~itudes mwad a produ~ am often based cn sodN or psychologicN attr~utes not

amenaNe to oNective compaNon, such as perceptions of the produa~ ae~hetic appeal,

sportiness, or aatus image (for examp~, in the UNmd Stores, French wine has ~adkion-

al~ been thought of as very expensNe or as an accompaniment to French foo~. Conse-

quemly, perceptu~ positioning analys~--wh~her aimed ~ ~scovering oppo~unities fornew product entries or eva~ating and a~u~g the poskion of a current offering~s crib

ical~ important.

EXHIBIT 7.2 2003 Vo~o XC90 ~. O~ AIPWh~PDr~e SUVs

Towing

Base Price Weight CapacRy EPA Mileage

Make/Mod~ (USD) En~ne/Ho~epower (pound~ (pound~ (City/H~hway}

Volvo XC90 2.5T AWD $35,100 5-cylJ208 ~450 5,000 18/24

BMW X5 3.0 $39,500 6<ylJ225 ~533 6,000 1 ~20

Mercede~Benz $36,950 VU232 4,819 5,000 1 ~18

ML350

Acura MDX $35,700 V7~60 ~420 ~500 17~3

Ford Explorer $3~785 V6/210 ~434 5,380 1 ~20

Som~ I~H Street ~ Ea~n E&ficn ~ff ~odu~d ~py onl~ by J~Mn Welsh. Copyright ~ ~ Dow Jon~ & Co., ~c, Rewod~ ~ p~mission & Dow~n~ & C~ ~ ~ ~e ~rm~ ~book !a Copyfig~ CD~a~e Ceme~

Chapter Seven Differentiation and Po~tion~g 157

PERCEPTUAL POSITIONING

Consumers often know very little about the essential physical a~mes of many produc~,

especial~ household products, and even if ~ey di& they would not understand the physi-

cal aHributes well enough to use lhem as a basis for choosing between cmnp~A~e offe>

ings. (For the m~or ~fferences b~ween physical and pemepmal product pos~ioning

analyses, see Exhib~ 7.3.) Many consumers do not want to be bothered about a product~

phyMcal charac~stics because they are not buying these physical prope~s but raher the

benefits they provide. While the physical prope~s of a produ~ ce~n~ influence fire

benefits provide~ a consumer can typical~ evaluae a product be~er m~ the basis of wha

~ does than what it is. Thus, for example, a headache remedy may be judged on hmv

quickly K brings rehe~ a ~hpa~e on the freshness of breafl~ pro~de~ a beer on its taste,

and a vehic~ on how comfo~ab~ it rides.The eva~ation of many products is su~ecfive because it is ~fluenced by favors other

than physical properties, inOu~ng the way produc~ are pmsente~ our past experiences

with them, and the opinions of other. Thus, phy~cal~ ~mHar producB may be pemeived

as being different because of ~fferent histories, names, and advertis~g camp~gns. For ex-

amp~, some people will pay conMderab~ more for Bayer aspirin than for an unadve~ed

priv~e label aspirin even though they are essentiM~ the same product.

LEVERS MARKETERS CAN USE TO ESTABLISH POSITIONING

Customers or prospective customers perceive some physical as well as other differences

between goods or services w~hin a product caegorE of course. Marketiug decision mak-

ers seeldng to win a particular position in cu~omers’ minds will seek to endow their prod-

uct with various kinds of attributes, which may be camgorized as follows:

Simple plo~sical~v based am4bute~ These are directly related to a single phy~cal di-

menfion such as qualR> poweg or size. While there may be a direct correspondence be-

tween a phys~al dimenfion and a perceptual a~fibute, an analysis of consumers’ pe~

cepfion of products on these attributes may unveil phenomena of intele~ to a marketing~rateg~ For in~ance, two cars with estimated gasofine mileage of 23.2 and 25.8 miles

per gallon may be perceived as having ~m~ar gasofine consumption.

EXHIBIT 7.3

Physical Positioning

¯ Technical oHenta~on

¯ Physical characteH~ks

¯ O~ectNe measures

¯ Data readily av~e

¯ Physical brand properties

¯ Large number of dimen~ons

¯ Represents impact of product specs

¯ Dire~t R&D im~a~ons

Comparison of Phyfical and P~p~N Pofifio~ng Ana~s

P~ce~u~ Pos~o~ng

¯ Consumer oHenta~on

¯ Pe~eptual attributes

¯ Pe~e~ual measu~s

¯ Need for ma~ing research

¯ Pe~eptual brand p~o~ and positio~ng intens~ies

¯ UmKed number of ~men~o~

¯ Represents impa~ of p~du~ ~e~ and commu~on

¯ R&D im~katio~ need to be i~e~d

158 Se~ion Two

Strategk IssuePerceptuM attributes

mu~ be consideredin posR~Nng mo~produc~.

¯ Complex ph3~ically based attributes. Because of the presence of a large number ofphysicN characterizes, consumers may use composke at~ibutes to evalu~e competi-five offerings. The development of such summary indicators is usuNly su~e~ive be-cause of the relative impo~ance a,ached to different cues. Examp~s of composke ~t-tributes are the speed of a computer sysmm, roominess of a ca~ and a productN orserviceN being user friendl~

¯ Essentially absO~ct attHbuW~ Akhough these perceptual a~ributes are influenced byphy~cN charactefi~ they are not related to them in any direct way Examples in-clude the sexiness of a perfume, qualky of a French wine, and pre~ige of a ca~ All ofthese a~fibutes are highly subjective and difficult to relate to physical charac~risficsother than by experience.

¯ PHca A product~ price may infer other att~butes, such as high or lo~v quarry.

The impo~ance of perceptuN a,ribu~s with thdr suNective component varies acrossconsumers and produ~ classes. Thus, k can be argued that consumers familiar w~h a gNenproduct class are apt to t~ly more on physical charac~ristics and less on perceptuM a~ri-butes than consumers who are less ~miliar wkh th~ produ~ class. It can also be arguedthat while perceptual product positioning is essential for nondurahle consumer goods, suchis not necessarily the case for durables (such as spo~ utilky vehicles) and many industrialgoods.

Even though them is cons~erable ~uth in these sm~ment~ pemeptuN attrNutes mu~be considered ~ poskioning mo~ produ~s. One reason is the growing ~m~arity of thephysicN chara~eristics of more and more produ~s. This increases the impo~ance of othe~large~ suNecfive dimen~ons. Conside~ for example, wh~her NikeN Air Jordan baske~bN1 shoes would have sold as well wkhout bask~bN! ace M~hael Jordan~ endorsementand his presence in their ads.

PREPARING THE FOUNDATION FOR MARKETING STRATEGIES:THE POSITIONING PROCESS

PoNtioNng a new produ~ ~ cusmm~s’ m~ds or ~posNoNng a ctrmm produ~ invoNesa series of ~eps, as omfined in ExNbk 7.4. These ~eps are app~cable to goods and se~~ces, ~ domestic or int~nationN markets, and m new or e~sting wodu~s. TNs is nm msugge~ th~ the demrm~ant product a,r~mes and ~e perceptions of consumes of ~evarious cmnpetitive offerings will remain cm~mnt across coumfi~ or o~ ma~ seg-meres; r~heg ~ey are l~dy to vary with most produ~s. Afi~ manages have selected a~am ~t of comp~mg offerings ~r~ng a mrg~ ma~k~ (S~p 1), ~ey must identify as~ of cfificN or determ~am wodu~ a,r~mes important m cu~om~s ~ ~ mrg~ ma~ket (S~p 2).

Stop 3 inv~ves collecting ~rmation from a samp~ of cu~om~s abom ~eir pe~ep-tions of ~e various offerings, and ~ Stop 4 researchers ana~ze tNs ~rmation to dem~mine ~e pmdu~N current poskion ~ cu~om~s’ minds and ~e i~ensky ~eof (Does koccupy a dominam posNon?), as well as those of competitors.

Manages ~en ~ce~a~ ~e cus~m~s’ most p~ed comb~ations of de~rm~a~ ~-tribm~, wNch requires ~e cM~n of fur~ data (Step 5). TNs allows an examinationof ~e fit between ~e p~nces of a gNen m~ ~gmem of cu~om~s and ~e curareposNons of comp~Nve offerings (Step 6). And finally, ~ Step 7, manages wfi~ a con-cise ~a~mem ~at cormm~cates ~e po~tio~ng de~on ~ey have ~ached. A di~us~onof these stops ~ ~e posNoNng process takes up mo~ of the mma~d~ of ~is chap~

EXHIBIT 7.4S~ps in thePositio~ngProcess

Chapter Seven Differentiation and Positioning 159

sewing a ~ maA~.

5. De~rm~e c~me~’ mo~ p~ed

po~tb& nEXam~of e~ ~ ~ ~of ~pmduth ~e ¯ ~n P~m~( ~m~k~ p~on~. ~’-’~l

pmpo~bn ~ gu~e dev~opmei nt~n~ ~~ ~i~ ~tof ~maA~~ ~yV .alU~nd I

~e~i~ pos~Ona Sdd~on~ nero w~~ be ~acedP.mdu~w shere J

Step 1: Identify a Relevant Set of Compe~ve Products

Pos~ioning ana~ses are useful ~ many levels: company, business unit, produ~ c~egor~and specific product l~e or bi’and. At the company or business-uNt level, such ana~ses areuseful to demrmine how an entire company or bufiness unit is positioned rdative to ~scompetitor. The results of such ana~ses are sometimes disphyed graphica~y by plottingcompeting companies or bu~nesses in thek respective quadrants of the generic ~r~e~esgrid shown in Exhibit 7.1. Larger or smN~r dots or ckdes are used to indic~e relines~es of competing firms.

At the produ~ c~egory level, the anNy~s exam~es cu~ome~’ percept~ns about Upesofproduc~ they might consider as substitu~s to satisfy the same basic need. Suppos~ forexample, a company is con~dering introducing a new instant b~ak~ drink. The newprodu~ would have to comp~e with other breakfa~ foods, such as bacon and eggs, break-N~ cereals, and even Ns~food drive-throughs. To unde~tand the new produ~ positionin the mm~e~ a mark~er could ob~in customer p~epfions of ~e new product conceptrehtNe to like~ substitute products on various crificN determinant attributes, as we de-scribe in Stops 3 and 4 of the positioning proce~ (see ExhibR 7.4). A poNtioning ana~sat the produ~ or brand level can be he~ful to be~er under~and how various brands appeNto cu~omers, to position proposed new produ~s or brands or reposition current ones, andto identify where new comp~itive opportunities m~ht be found.

158 Se~ion Two

Strategk IssuePerceptuM attributes

mu~ be consideredin posR~Nng mo~produc~.

¯ Complex ph3~ically based attributes. Because of the presence of a large number ofphysicN characterizes, consumers may use composke at~ibutes to evalu~e competi-five offerings. The development of such summary indicators is usuNly su~e~ive be-cause of the relative impo~ance a,ached to different cues. Examp~s of composke ~t-tributes are the speed of a computer sysmm, roominess of a ca~ and a productN orserviceN being user friendl~

¯ Essentially absO~ct attHbuW~ Akhough these perceptual a~ributes are influenced byphy~cN charactefi~ they are not related to them in any direct way Examples in-clude the sexiness of a perfume, qualky of a French wine, and pre~ige of a ca~ All ofthese a~fibutes are highly subjective and difficult to relate to physical charac~risficsother than by experience.

¯ PHca A product~ price may infer other att~butes, such as high or lo~v quarry.

The impo~ance of perceptuN a,ribu~s with thdr suNective component varies acrossconsumers and produ~ classes. Thus, k can be argued that consumers familiar w~h a gNenproduct class are apt to t~ly more on physical charac~ristics and less on perceptuM a~ri-butes than consumers who are less ~miliar wkh th~ produ~ class. It can also be arguedthat while perceptual product positioning is essential for nondurahle consumer goods, suchis not necessarily the case for durables (such as spo~ utilky vehicles) and many industrialgoods.

Even though them is cons~erable ~uth in these sm~ment~ pemeptuN attrNutes mu~be considered ~ poskioning mo~ produ~s. One reason is the growing ~m~arity of thephysicN chara~eristics of more and more produ~s. This increases the impo~ance of othe~large~ suNecfive dimen~ons. Conside~ for example, wh~her NikeN Air Jordan baske~bN1 shoes would have sold as well wkhout bask~bN! ace M~hael Jordan~ endorsementand his presence in their ads.

PREPARING THE FOUNDATION FOR MARKETING STRATEGIES:THE POSITIONING PROCESS

PoNtioNng a new produ~ ~ cusmm~s’ m~ds or ~posNoNng a ctrmm produ~ invoNesa series of ~eps, as omfined in ExNbk 7.4. These ~eps are app~cable to goods and se~~ces, ~ domestic or int~nationN markets, and m new or e~sting wodu~s. TNs is nm msugge~ th~ the demrm~ant product a,r~mes and ~e perceptions of consumes of ~evarious cmnpetitive offerings will remain cm~mnt across coumfi~ or o~ ma~ seg-meres; r~heg ~ey are l~dy to vary with most produ~s. Afi~ manages have selected a~am ~t of comp~mg offerings ~r~ng a mrg~ ma~k~ (S~p 1), ~ey must identify as~ of cfificN or determ~am wodu~ a,r~mes important m cu~om~s ~ ~ mrg~ ma~ket (S~p 2).

Stop 3 inv~ves collecting ~rmation from a samp~ of cu~om~s abom ~eir pe~ep-tions of ~e various offerings, and ~ Stop 4 researchers ana~ze tNs ~rmation to dem~mine ~e pmdu~N current poskion ~ cu~om~s’ minds and ~e i~ensky ~eof (Does koccupy a dominam posNon?), as well as those of competitors.

Manages ~en ~ce~a~ ~e cus~m~s’ most p~ed comb~ations of de~rm~a~ ~-tribm~, wNch requires ~e cM~n of fur~ data (Step 5). TNs allows an examinationof ~e fit between ~e p~nces of a gNen m~ ~gmem of cu~om~s and ~e curareposNons of comp~Nve offerings (Step 6). And finally, ~ Step 7, manages wfi~ a con-cise ~a~mem ~at cormm~cates ~e po~tio~ng de~on ~ey have ~ached. A di~us~onof these stops ~ ~e posNoNng process takes up mo~ of the mma~d~ of ~is chap~

EXHIBIT 7.4S~ps in thePositio~ngProcess

Chapter Seven Differentiation and Positioning 159

sewing a ~ maA~.

5. De~rm~e c~me~’ mo~ p~ed

po~tb& nEXam~of e~ ~ ~ ~of ~pmduth ~e ¯ ~n P~m~( ~m~k~ p~on~. ~’-’~l

pmpo~bn ~ gu~e dev~opmei nt~n~ ~~ ~i~ ~tof ~maA~~ ~yV .alU~nd I

~e~i~ pos~Ona Sdd~on~ nero w~~ be ~acedP.mdu~w shere J

Step 1: Identify a Relevant Set of Compe~ve Products

Pos~ioning ana~ses are useful ~ many levels: company, business unit, produ~ c~egor~and specific product l~e or bi’and. At the company or business-uNt level, such ana~ses areuseful to demrmine how an entire company or bufiness unit is positioned rdative to ~scompetitor. The results of such ana~ses are sometimes disphyed graphica~y by plottingcompeting companies or bu~nesses in thek respective quadrants of the generic ~r~e~esgrid shown in Exhibit 7.1. Larger or smN~r dots or ckdes are used to indic~e relines~es of competing firms.

At the produ~ c~egory level, the anNy~s exam~es cu~ome~’ percept~ns about Upesofproduc~ they might consider as substitu~s to satisfy the same basic need. Suppos~ forexample, a company is con~dering introducing a new instant b~ak~ drink. The newprodu~ would have to comp~e with other breakfa~ foods, such as bacon and eggs, break-N~ cereals, and even Ns~food drive-throughs. To unde~tand the new produ~ positionin the mm~e~ a mark~er could ob~in customer p~epfions of ~e new product conceptrehtNe to like~ substitute products on various crificN determinant attributes, as we de-scribe in Stops 3 and 4 of the positioning proce~ (see ExhibR 7.4). A poNtioning ana~sat the produ~ or brand level can be he~ful to be~er under~and how various brands appeNto cu~omers, to position proposed new produ~s or brands or reposition current ones, andto identify where new comp~itive opportunities m~ht be found.

Strategk IssueM~k~s who omit im-potato substitutepmdu~s or pmemiNcompetim~ ~sk beingN~ds~ed by unPin-seen c~npeti~on,

At whichever level the positioning analysN is to be done, the ana~ cho~e of compet-ing products (or product categories or firms) is critical. Marke~rs who omit important sub-stitu~ pmduc~ or pomntiN compe6m~ risk being blindNded by unforeseen competition.

Step 2: Identify Determinant A~ributesPosNoNng can be based on a varify of ~mes--~me ~ the ~rm ~ ~s ~atimp~ d~imNe ~amms ~ bmm~s as a poisoning base. Stone ~ bases am ~e

¯ Features are often used ~ phys~N produ~ pos~ioning an@ hence, wi~ ~dustriMpmdu~s. An example of ~s use w~h a consum~ good is U.S. high-end home apphancemaker Jerm-Air~ claim, "This is ~e quiem~ ~shwash~ made in Ame~ca?’Amazomcom has a uNque "l-d~k®" ordering sy~em.

¯ Benefit, l~e ~ums am Nmcfly ml~ed m a pmdu~. Examp~s he~ ~c~de Volvo~~mphaMs on ~fet~ Toyom~ emphasis cn MNbility, znd Nordco~ promiMng a "closeand comfo~aNe shave?’

¯ Parentage ~c~des who makes it (bottled by a French ~ntner; "At Fidd~ you~e notjust bufing a fun& a ~ock, or a bond--you’re bu~ng a be,er way to manage it") andprior produ~s ~’Buying a c~ is like getting m~ed. ~ a good Nea m know ~e ~m-i~ firsC’ followed by a ~cmre of the ancestors of the Mercede~Benz S class modal).

¯ ManufaetuNng p~ee~ is often ~e su~ect ofa firm~ positioning efforts. An examNeis Jaege~LeCoult~ ~ement about Rs w~ches, "We know RN perfect, but we take an-other 1,000 hou~ ju~ m be sure?’

¯ Ingredien~ as a positioning concept is ~s~amd by some doing manu~cmm~’ say-~g thek spo~ shirts a~ made o~y of pure co,on.

¯ Endorsements are of two types--those by expels ~’Discover why over 5,000 Ameri-can docto~ and meNcal pm~sNonNs prescribe this SweNsh ma~res~’---Tempor-PeNc) and fl~ose via em~ation as wRh Michael Jordan using Nike shoes.

¯ Comparison wi~ a competitor~ produ~ is common ~’Te~s prove PeNgme ~ more nu-tri6ous than IAMS, cos~ less than IAMS, and tastes grea~ too"~PeNgree Mealtimepm food).

¯ Proenv~onment positioNng seeks to po~ray a company as a good citizen ~’Becausewe recycle over 100 miH~n plastic bo~les a yea~ landfills can be filled with otherthings, like lan~ for ~stanc~’~Phillips Pe~Neum, now pa~ of Conoco PhillipS.

¯ PNeNquMity is used ~ cases such as WabMa~ successfully poMtioNng itself as the~wes~price seller of househoN pmduc~.

Theoretically, cm~umers can use many aa~bmes ~ eva~a~ pmduc~ or brands, but lhe

number ac~N~ influencing a consum~N choice is ty~cal~ small, part~ because con-

sumps can consider oNy attributes of wNch they are aware. The more variaNes used in

po~fioNng a gwen produc~ the greater the chance of confuMon and even Nsbelief on the

pa~ of the consume~ The po~tion~g effo~ mu~ be kept as ~mp~ as poss~ and com-

plexity should be av~ded ~ M1 costs.

In using one or more a~fibutes as the basis of a brandN posNoNng effort, it is impo~tant to ~cogNze th~ the impo~ance a~ached to these ~tributes often varies. For example,

while ~e brands of soap or shampoo provided by a hotel may be an a~ribme ~at some

consumers use ~ evaNating h~s, mog are uulike~ ~ attach much importance ~ R when

deciding which howl cha~ to p~ronize. Even an impotent a~ribnte may not greatly ~-

fluence a consumer~ preference if M1 the aRern~Ne brands are perceived to be about equal

on th~ NmenNon. Deposit ~fety is an important attribute in ban~ng, bnt mo~ consumers

Chapter Seven Differentiation and Po~on~g 161

p~ceNe all ba~9;s ~ be about equally ~l?. Consequen0L deposit ~fety is not a d~erm~nant a~Hbu~: ~ does n~ pl~ a m~ m~ in he~g cu~om~s ~ ~ffe~ntiate amongthe aR~nmN~ and m d~m~e which ba~fl~ they pre~a

M~ke~ should m~ prim~i~ on determinant attributes, v,he~ benefi~ ~ fea~r~,~ defiNng the product space in a p~NoNng ana~Ms. The question is, "How can a ma~keter find out which product dimenMons am det~rm~ant attr~utes?" Doing so tyNcN~requires conducting some ~nd of maN~g research. This brin~ us to Step 3.

Step 3: Collect Data about Customers’ PercepOons for Productsin the Compe~ve SetHa~ng ident~ed a s~ of comping pmdu~s, ~e m~ke~r ~eeds ~ know what a~ribmesare determ~ant ~r ~e ~Net manet and ~e pmdu~ ca~gory under cons~ion. He orshe also needs to know how ~fferent produ~s in ~e compe~Ne set are !ewed on ~esea~ributes. TyN~I~ this m~ket knowledge is developed by fir~ conducting quali~five re-pack p~haps ~r~ews ~ ~cus groups, ~ ~n which a~ribu~s am de~n~nant. Thenquanti~tNe research ~llows, pe~aps a survey of consumers about ~e~ perceptions, tog~her d~a on how comp~ing pmduc~ sco~ on ~ese a~ributes. L~ ~ this chaNe~ wediscuss several ~atisti~l and anal~ical tools ~ are use~] in this portion of ~e posi-fio~ng pm~.

Step 4: Analyze the Current Po~ons of Products in the

Competitive Set

Whe~er ~e positioning process is ~ed ~ a new product n~ yet introduced or ~posi-fioning one ~at Nmady exits, it is impo~ant to develop a clear unders~nd~g of ~e po-sitioNng of ~e products that have been de~rmined m be in ~e comp~itive set (see Step1). Thffe are two useful runs for do~g so. One is ~e portioning g~d, also calkd a p~r-eeptual map? The o~ N ~e valne curve. The po~fioNng grid provides a !sual repre-sentation of the portions of various produ~s or brands ~ the competitive set in ~rms of(tyNcally) two dNerminant attribu~ Where mo~ than two attributes am m be consMemdin a positioNng ana~ m~fi~mens~nN grids, or mu~pk grids, are produced. AI~natively, a va~e curve, which comprises morn than ju~ two Nmen~ons, can be genermed(see b~ow).

But not aH products or brands exist in the minds of most consumers. A brand N~ is notknown by a consumer canno~ by defiNfio~ occupy a position ~ ~m consum~ mind.Often ~e awarene~ set for a gNen product class is ~me cr ~w~ brands even Nough ~enumber of avaiNNe brands is gm~er than 20. Thus, many if not mo~ b~nds have littk orno poNtion in the minds of many consumers. For example, in ~e last 10 or so years, more¯ an 200 new soft drinks have been introduce& most of which were not noticed or re-memb~ed by consumers. An examp~ of a brand wi~ a ~rong positiomng is BMW and~s powerful c~s as ~e "Ultima~ Dri~ng Mac~ne~ De~n~in~g ~e a~ributes on which¯ e product~ positioning will be based is a key outcome of the portioning process and adriver of the marketing communication ~mmg~ as well as the marketing s~egy overall,th~ will ultima~ be developed. Wi~ont clear gNdance about ~e ~mnded portion of¯ e pmdu~, adverting agendes, sNesfomes, and others charged with buil~ng the aware-ness and recognition of the pmdu~ ~ ~e m~ke~ce will be ill-equipped m do ~is im-po~ant job.

BnHding a Positionh~ Grid

An ~amp~ of what can be done wi~ dma gmh~ed in S~p 3 is ~und in Exh~R 7.5,which shows ~e ms~ oNNned from a study done by Babson College ~m portr~s howa samNe ofcon~m~s p~No~d a nmnb~ ~wom~b clothing ~tailers in the Washington,

Strategk IssueM~k~s who omit im-potato substitutepmdu~s or pmemiNcompetim~ ~sk beingN~ds~ed by unPin-seen c~npeti~on,

At whichever level the positioning analysN is to be done, the ana~ cho~e of compet-ing products (or product categories or firms) is critical. Marke~rs who omit important sub-stitu~ pmduc~ or pomntiN compe6m~ risk being blindNded by unforeseen competition.

Step 2: Identify Determinant A~ributesPosNoNng can be based on a varify of ~mes--~me ~ the ~rm ~ ~s ~atimp~ d~imNe ~amms ~ bmm~s as a poisoning base. Stone ~ bases am ~e

¯ Features are often used ~ phys~N produ~ pos~ioning an@ hence, wi~ ~dustriMpmdu~s. An example of ~s use w~h a consum~ good is U.S. high-end home apphancemaker Jerm-Air~ claim, "This is ~e quiem~ ~shwash~ made in Ame~ca?’Amazomcom has a uNque "l-d~k®" ordering sy~em.

¯ Benefit, l~e ~ums am Nmcfly ml~ed m a pmdu~. Examp~s he~ ~c~de Volvo~~mphaMs on ~fet~ Toyom~ emphasis cn MNbility, znd Nordco~ promiMng a "closeand comfo~aNe shave?’

¯ Parentage ~c~des who makes it (bottled by a French ~ntner; "At Fidd~ you~e notjust bufing a fun& a ~ock, or a bond--you’re bu~ng a be,er way to manage it") andprior produ~s ~’Buying a c~ is like getting m~ed. ~ a good Nea m know ~e ~m-i~ firsC’ followed by a ~cmre of the ancestors of the Mercede~Benz S class modal).

¯ ManufaetuNng p~ee~ is often ~e su~ect ofa firm~ positioning efforts. An examNeis Jaege~LeCoult~ ~ement about Rs w~ches, "We know RN perfect, but we take an-other 1,000 hou~ ju~ m be sure?’

¯ Ingredien~ as a positioning concept is ~s~amd by some doing manu~cmm~’ say-~g thek spo~ shirts a~ made o~y of pure co,on.

¯ Endorsements are of two types--those by expels ~’Discover why over 5,000 Ameri-can docto~ and meNcal pm~sNonNs prescribe this SweNsh ma~res~’---Tempor-PeNc) and fl~ose via em~ation as wRh Michael Jordan using Nike shoes.

¯ Comparison wi~ a competitor~ produ~ is common ~’Te~s prove PeNgme ~ more nu-tri6ous than IAMS, cos~ less than IAMS, and tastes grea~ too"~PeNgree Mealtimepm food).

¯ Proenv~onment positioNng seeks to po~ray a company as a good citizen ~’Becausewe recycle over 100 miH~n plastic bo~les a yea~ landfills can be filled with otherthings, like lan~ for ~stanc~’~Phillips Pe~Neum, now pa~ of Conoco PhillipS.

¯ PNeNquMity is used ~ cases such as WabMa~ successfully poMtioNng itself as the~wes~price seller of househoN pmduc~.

Theoretically, cm~umers can use many aa~bmes ~ eva~a~ pmduc~ or brands, but lhe

number ac~N~ influencing a consum~N choice is ty~cal~ small, part~ because con-

sumps can consider oNy attributes of wNch they are aware. The more variaNes used in

po~fioNng a gwen produc~ the greater the chance of confuMon and even Nsbelief on the

pa~ of the consume~ The po~tion~g effo~ mu~ be kept as ~mp~ as poss~ and com-

plexity should be av~ded ~ M1 costs.

In using one or more a~fibutes as the basis of a brandN posNoNng effort, it is impo~tant to ~cogNze th~ the impo~ance a~ached to these ~tributes often varies. For example,

while ~e brands of soap or shampoo provided by a hotel may be an a~ribme ~at some

consumers use ~ evaNating h~s, mog are uulike~ ~ attach much importance ~ R when

deciding which howl cha~ to p~ronize. Even an impotent a~ribnte may not greatly ~-

fluence a consumer~ preference if M1 the aRern~Ne brands are perceived to be about equal

on th~ NmenNon. Deposit ~fety is an important attribute in ban~ng, bnt mo~ consumers

Chapter Seven Differentiation and Po~on~g 161

p~ceNe all ba~9;s ~ be about equally ~l?. Consequen0L deposit ~fety is not a d~erm~nant a~Hbu~: ~ does n~ pl~ a m~ m~ in he~g cu~om~s ~ ~ffe~ntiate amongthe aR~nmN~ and m d~m~e which ba~fl~ they pre~a

M~ke~ should m~ prim~i~ on determinant attributes, v,he~ benefi~ ~ fea~r~,~ defiNng the product space in a p~NoNng ana~Ms. The question is, "How can a ma~keter find out which product dimenMons am det~rm~ant attr~utes?" Doing so tyNcN~requires conducting some ~nd of maN~g research. This brin~ us to Step 3.

Step 3: Collect Data about Customers’ PercepOons for Productsin the Compe~ve SetHa~ng ident~ed a s~ of comping pmdu~s, ~e m~ke~r ~eeds ~ know what a~ribmesare determ~ant ~r ~e ~Net manet and ~e pmdu~ ca~gory under cons~ion. He orshe also needs to know how ~fferent produ~s in ~e compe~Ne set are !ewed on ~esea~ributes. TyN~I~ this m~ket knowledge is developed by fir~ conducting quali~five re-pack p~haps ~r~ews ~ ~cus groups, ~ ~n which a~ribu~s am de~n~nant. Thenquanti~tNe research ~llows, pe~aps a survey of consumers about ~e~ perceptions, tog~her d~a on how comp~ing pmduc~ sco~ on ~ese a~ributes. L~ ~ this chaNe~ wediscuss several ~atisti~l and anal~ical tools ~ are use~] in this portion of ~e posi-fio~ng pm~.

Step 4: Analyze the Current Po~ons of Products in the

Competitive Set

Whe~er ~e positioning process is ~ed ~ a new product n~ yet introduced or ~posi-fioning one ~at Nmady exits, it is impo~ant to develop a clear unders~nd~g of ~e po-sitioNng of ~e products that have been de~rmined m be in ~e comp~itive set (see Step1). Thffe are two useful runs for do~g so. One is ~e portioning g~d, also calkd a p~r-eeptual map? The o~ N ~e valne curve. The po~fioNng grid provides a !sual repre-sentation of the portions of various produ~s or brands ~ the competitive set in ~rms of(tyNcally) two dNerminant attribu~ Where mo~ than two attributes am m be consMemdin a positioNng ana~ m~fi~mens~nN grids, or mu~pk grids, are produced. AI~natively, a va~e curve, which comprises morn than ju~ two Nmen~ons, can be genermed(see b~ow).

But not aH products or brands exist in the minds of most consumers. A brand N~ is notknown by a consumer canno~ by defiNfio~ occupy a position ~ ~m consum~ mind.Often ~e awarene~ set for a gNen product class is ~me cr ~w~ brands even Nough ~enumber of avaiNNe brands is gm~er than 20. Thus, many if not mo~ b~nds have littk orno poNtion in the minds of many consumers. For example, in ~e last 10 or so years, more¯ an 200 new soft drinks have been introduce& most of which were not noticed or re-memb~ed by consumers. An examp~ of a brand wi~ a ~rong positiomng is BMW and~s powerful c~s as ~e "Ultima~ Dri~ng Mac~ne~ De~n~in~g ~e a~ributes on which¯ e product~ positioning will be based is a key outcome of the portioning process and adriver of the marketing communication ~mmg~ as well as the marketing s~egy overall,th~ will ultima~ be developed. Wi~ont clear gNdance about ~e ~mnded portion of¯ e pmdu~, adverting agendes, sNesfomes, and others charged with buil~ng the aware-ness and recognition of the pmdu~ ~ ~e m~ke~ce will be ill-equipped m do ~is im-po~ant job.

BnHding a Positionh~ Grid

An ~amp~ of what can be done wi~ dma gmh~ed in S~p 3 is ~und in Exh~R 7.5,which shows ~e ms~ oNNned from a study done by Babson College ~m portr~s howa samNe ofcon~m~s p~No~d a nmnb~ ~wom~b clothing ~tailers in the Washington,

162 Sec~on Two

~: A~ ~m D~~gen and S~ph~ Amol&"Nords~om: How Good A~TheyT’ ~bson ~llege R~-

h~ R~r~h R~

~ptemb~ 1~ ~ sko\~n ~M~ L~y ~d B~Weitz, Relailing AMn~n~l

~urr N~ K: Richard ~I~M 1~2~ p. 205. ~pdmed

W~hi~n 1~0 Womeffs ~n mark~

¯ The Umi~d

N~man Marcus

| Saks ¯ Bloomingd~#s

Mac~s

¯ No~mm

Hit or M~s ¯

¯¯ Dress Barn

Ga~nk~s ~J. Maxx ¯The Gap ¯ ¯

Casu~ Corner Sass~s

L&T ~ Ma~h~¯ Hechfs

¯ Bd~hes Woodwa~

| Kma~ ¯ ¯ aSea~ JC Penney L~hmp

Talb~s

Women~we~ value ~r the

Worst v~ue ( ~ Be~v~ue

Loehmanffs

D.C., ~ea." Re~onde~s rated ~e vafions ~es on ~e two determinam a~fib~es of vNue

and ~naN~ty. Some ~ores, such as N~ds~om and Kraal, occupy mlative~ ~a~positions from one ano~e~ ~cating th~ consumes see them as very ~ffem~. Other

~es occupy posNons comp~aNe ~ one ~n~h~ (N~man M~cus, Saks) and ~us ~econsN~ed relative~ aloe, meaNng ~e intensity of comp~Non between ~ese ~oms is

l~e~ ~ be con~d~ab~ gma~r ~an ~r ~ose ~ occupy wide~ dNe~em pos~ions.

The store posNoNng shown m ExNbR 7.5 also pin, des use~l ~rm~n about pos-

~Ne oppormnit~s ~r ~e huncNng of a new ~e ~ ~e mposNon~g of an e~sting one.

PosNoNng ~r a new ~ore could be done by examin~g the posNoNng map ~r emp~

spaces @ompetitive gapQ where no existing ~ore is currently ~d. There is such a gap

~ ~e upper rigN qua&am of~e ’~MuU~sNonaN1Rf’ map ~ ExNbR 7.5. This gap may

mpr~e~ an opp~mnity ~r dev~op~g a new e~y or mpoNfiomng an old one ~ is pe~

ceNed to offer greater ~shionability ~an N~dstrom ~ a ~wer price. Of coupe, such gaps

may exist simp~ because a particul~ position is eRher (1) impossible ~r any brand ~ ~-

~ b~ause of ~chNcal constraints or (2) undes~aNe s~ce ~em ~e ~w pm~ective cus-

~m~s ~r a brand wi~ ~ ~t of attfib~es.

Buildittg a Value Curve

GNen ~at ~aft~g s~e~es invMves ma~ng choic~---chNces abom what not ~ do, as

well ~ wh~ to do--another useNl tool ~r posR~Nng decision is the value curve.’~ Va~e

curves ~c~e how produ~s witNn a c~egcry cmnp~e ~ ~rms of ~e level--high or~w--of as many a~fibm~ as ~e m~vam. Thus, uNike p~cepmN m~ps, wNch ~e mo~

e~i~ !ewed in just two ~men~ons, vNue curves ~e morn m~fi~mens~nM.

EXHIBIT 7.6Value Curves ~rNdman Marcu~JCPenney, and Sears

5t~tegk IssueC~npeting hea~onagNn~ ~e leaders on¯ e basis of aUfibm~appropfi~ed by Nrgercomp~i~ is n~ l~ym be efl?ctive.

Level of eacha~dbu~ High

Chapter Seven Differentiation and Positioning 163

~ ~ JCPenney

~1~ NeimanMamus

Sometimes, value is best delivered by eliminating or reducing the level of some attri-

butes, espeNNly those not really desked or apprechted by the target cu~ome~ and in-

creasing the level of others, the ones the customer really wants. LetN imagine Ihat in addi-

tion to the data shown on the perceptuN map in Exhibk 7.5, we have data about several

other variables for two stores: Neiman Marcus and JCPenney. We could build value curves

for the two retailers by plotting these hypothetical data as shown in Exhib~ 7.6.

The value curves show that, among other things, JCPenney chooses to compete by re-

ducing ks level of customer service, ambiance, category depth, and fashionabHkE pre-

sumably in order to deliver increased value for mone~ Neiman Marcus offers higher lev-

els ofcuaomer service, ambiance, category depth, and fashionabi~ty, presumably becausethe target cu~omer k seeks to serve is willing to pay for these attributes.

Marketit,g Opportunities W Gain a Distina PoMtion

In Nmations where one or a lim~ed numb~ of brands dominam a product class (or Upe)

~ the minds of consume~, ~e mare oppwmN~ ~r competim~ gen~N~ lies ~ oNa~-

~g a profitab~ posit~n within a mak~ segmem not dom~aed by a Ea~ng brand. Com-

peting head-on against the leade~ on ~e basis of a~fibm~ appropfiaed by larger com-

petim~ is not lke~ m be effective.

A b~mr option is to concenV~e on an a~fibu~ prized by memb~s of a ~ven mak~

~gmem. Thus in ~e UN~d ~aes, For~ ha%ng targeted women and young Nm~es, po-

sNoned ks new W~d~a m~Nan primafi~ on the basis of ~U and cargo space ghe

most of any miNva~. In~oduced ~ ~e ~ring of 1994, W~&~r was come~g ~e

Dodge Caavan %r the mp4eH~g miNvan ~m a year lae~"

Co,tstraitt~ Imposed by an Itttettse Positiott

Although mark~s shoed gen~N~ seek a ~sfin~Ne and imen~ posNon ~r thek

brands, a~a~g such a posNon impo~s con~mims on N~re Stl’~eNes. If shifts in ~e

mark~ environment cau~ cus~m~s to reduce ~e importance ~ey a~ach to a cuwent de-

~rminam attfibme, m~k~s may have Nffic~ repositioning a brand w~h an imen~

p~ceNed position on ~at a~ribme. ReposNon~g carries w~h ~ the threat of alienating

pa~ or all of the product~ currem users regardless of succe~ ~vith ~s new~ mrg~ed group.

Success in ~s mpoMtioNng effo~s may well ensure ~smg ~s current group of users.

162 Sec~on Two

~: A~ ~m D~~gen and S~ph~ Amol&"Nords~om: How Good A~TheyT’ ~bson ~llege R~-

h~ R~r~h R~

~ptemb~ 1~ ~ sko\~n ~M~ L~y ~d B~Weitz, Relailing AMn~n~l

~urr N~ K: Richard ~I~M 1~2~ p. 205. ~pdmed

W~hi~n 1~0 Womeffs ~n mark~

¯ The Umi~d

N~man Marcus

| Saks ¯ Bloomingd~#s

Mac~s

¯ No~mm

Hit or M~s ¯

¯¯ Dress Barn

Ga~nk~s ~J. Maxx ¯The Gap ¯ ¯

Casu~ Corner Sass~s

L&T ~ Ma~h~¯ Hechfs

¯ Bd~hes Woodwa~

| Kma~ ¯ ¯ aSea~ JC Penney L~hmp

Talb~s

Women~we~ value ~r the

Worst v~ue ( ~ Be~v~ue

Loehmanffs

D.C., ~ea." Re~onde~s rated ~e vafions ~es on ~e two determinam a~fib~es of vNue

and ~naN~ty. Some ~ores, such as N~ds~om and Kraal, occupy mlative~ ~a~positions from one ano~e~ ~cating th~ consumes see them as very ~ffem~. Other

~es occupy posNons comp~aNe ~ one ~n~h~ (N~man M~cus, Saks) and ~us ~econsN~ed relative~ aloe, meaNng ~e intensity of comp~Non between ~ese ~oms is

l~e~ ~ be con~d~ab~ gma~r ~an ~r ~ose ~ occupy wide~ dNe~em pos~ions.

The store posNoNng shown m ExNbR 7.5 also pin, des use~l ~rm~n about pos-

~Ne oppormnit~s ~r ~e huncNng of a new ~e ~ ~e mposNon~g of an e~sting one.

PosNoNng ~r a new ~ore could be done by examin~g the posNoNng map ~r emp~

spaces @ompetitive gapQ where no existing ~ore is currently ~d. There is such a gap

~ ~e upper rigN qua&am of~e ’~MuU~sNonaN1Rf’ map ~ ExNbR 7.5. This gap may

mpr~e~ an opp~mnity ~r dev~op~g a new e~y or mpoNfiomng an old one ~ is pe~

ceNed to offer greater ~shionability ~an N~dstrom ~ a ~wer price. Of coupe, such gaps

may exist simp~ because a particul~ position is eRher (1) impossible ~r any brand ~ ~-

~ b~ause of ~chNcal constraints or (2) undes~aNe s~ce ~em ~e ~w pm~ective cus-

~m~s ~r a brand wi~ ~ ~t of attfib~es.

Buildittg a Value Curve

GNen ~at ~aft~g s~e~es invMves ma~ng choic~---chNces abom what not ~ do, as

well ~ wh~ to do--another useNl tool ~r posR~Nng decision is the value curve.’~ Va~e

curves ~c~e how produ~s witNn a c~egcry cmnp~e ~ ~rms of ~e level--high or~w--of as many a~fibm~ as ~e m~vam. Thus, uNike p~cepmN m~ps, wNch ~e mo~

e~i~ !ewed in just two ~men~ons, vNue curves ~e morn m~fi~mens~nM.

EXHIBIT 7.6Value Curves ~rNdman Marcu~JCPenney, and Sears

5t~tegk IssueC~npeting hea~onagNn~ ~e leaders on¯ e basis of aUfibm~appropfi~ed by Nrgercomp~i~ is n~ l~ym be efl?ctive.

Level of eacha~dbu~ High

Chapter Seven Differentiation and Positioning 163

~ ~ JCPenney

~1~ NeimanMamus

Sometimes, value is best delivered by eliminating or reducing the level of some attri-

butes, espeNNly those not really desked or apprechted by the target cu~ome~ and in-

creasing the level of others, the ones the customer really wants. LetN imagine Ihat in addi-

tion to the data shown on the perceptuN map in Exhibk 7.5, we have data about several

other variables for two stores: Neiman Marcus and JCPenney. We could build value curves

for the two retailers by plotting these hypothetical data as shown in Exhib~ 7.6.

The value curves show that, among other things, JCPenney chooses to compete by re-

ducing ks level of customer service, ambiance, category depth, and fashionabHkE pre-

sumably in order to deliver increased value for mone~ Neiman Marcus offers higher lev-

els ofcuaomer service, ambiance, category depth, and fashionabi~ty, presumably becausethe target cu~omer k seeks to serve is willing to pay for these attributes.

Marketit,g Opportunities W Gain a Distina PoMtion

In Nmations where one or a lim~ed numb~ of brands dominam a product class (or Upe)

~ the minds of consume~, ~e mare oppwmN~ ~r competim~ gen~N~ lies ~ oNa~-

~g a profitab~ posit~n within a mak~ segmem not dom~aed by a Ea~ng brand. Com-

peting head-on against the leade~ on ~e basis of a~fibm~ appropfiaed by larger com-

petim~ is not lke~ m be effective.

A b~mr option is to concenV~e on an a~fibu~ prized by memb~s of a ~ven mak~

~gmem. Thus in ~e UN~d ~aes, For~ ha%ng targeted women and young Nm~es, po-

sNoned ks new W~d~a m~Nan primafi~ on the basis of ~U and cargo space ghe

most of any miNva~. In~oduced ~ ~e ~ring of 1994, W~&~r was come~g ~e

Dodge Caavan %r the mp4eH~g miNvan ~m a year lae~"

Co,tstraitt~ Imposed by an Itttettse Positiott

Although mark~s shoed gen~N~ seek a ~sfin~Ne and imen~ posNon ~r thek

brands, a~a~g such a posNon impo~s con~mims on N~re Stl’~eNes. If shifts in ~e

mark~ environment cau~ cus~m~s to reduce ~e importance ~ey a~ach to a cuwent de-

~rminam attfibme, m~k~s may have Nffic~ repositioning a brand w~h an imen~

p~ceNed position on ~at a~ribme. ReposNon~g carries w~h ~ the threat of alienating

pa~ or all of the product~ currem users regardless of succe~ ~vith ~s new~ mrg~ed group.

Success in ~s mpoMtioNng effo~s may well ensure ~smg ~s current group of users.

’1

164 Sec~on Two

Another concern is the dilution of an exi~ing intense position as a resu~ of consolida-tion. For example, British Leyland was formed through a series of merge~ involving anumber of British car manufacturers. For years, the company did not have a clear identitybecause it was new and manufactured a variety of brands, including Roveg Triump~ andAustin-Morris. Mo~ Europeans had difficuRy recalling spontaneously any British carmanufacturer Nnce once-strong brand names such as AuXin and Morris had lo~ the~ iden-tity and meaning. Since Ley~nd~ 1994 acquisition by BMW and the reintrodu~ion of theMini Coope~ the brand~ weak positioning may have strengthened some~vhat?~

Another danger assoc~wd with an in~nsely positioned brand is the temp~fion to ove~exploR th~ posRion by using the brand name on line ex~nsions and new products. Thedanger here is that the new products may not fit the ofiginN posRioning and the brand~s~ong image is d~uted. For examp~, in the late 1990s, the Holiday Inn Group offered trav-elers the cho~e of gaying in Holiday Imp, Holiday Im~ Express, Ho~day Inn Select, or Hol-iday hm Garden Court, each of which was at a differem price point and service offering.’~

Such a dive~e offering can be very confuNng to consumers.

Lim#ations of Product Positioning Analys&

The anNy~s depicted ~ Exh~R 7.5 is usuM~ m~wed to as productpositio~fing because

it ~Oc~es how aRern~Ne produ~s or brands are positioned mNfive to one m~mh~ ~ cus-

tomers’ n~nds. The proNmn with ~is ana~d~ ~ougK is Oat it does not WR ~e markemr

which portions are mo~ appeN~g m cugmne~.~ Thus, ~e is no way m demrm~e if

there is a markm for a new brand or ~ore ~ reign locNe ~ an "open" posR~n or

whe~er the cu~om~s in mh~ market segme~s pm~r brands or smms wRh ~ffemnt at-

tributes and positions. To salve such problems ~ is neeess~y m measure cus~m~s’ pro>erences and loc~e them ~ the product space along with the~ pemeptions of ~e positions

of e~sting brands. This is called a market positioning analysis. We deal wi~ Nis issuein Stop 5.

Step 5: Determine Customers’ Most Preferred Combina~on

of AttributesThere are several ways ana~s can measu~ cu~om~ p~nces and ~c~de them in apositioning ana~sis. For instance, survey respondents can be asked to think of ~e idealproduct or brand within a product category--a hypo~eficN brand posse~g the perfectcomb~n of a~ributes (~om ~he cu~omer~ !ewpoint). Respondents co~d ~en m~¯ ek ideN produ~ and e~sti~g produ~s on a number of a~ributes. An aR~n~Ne ~pproachis to ask ~spondents not on~ m judge the degree of ~mi~fity among paks of existingbrands but also to ~c~e ~ek degree of pm~nce for each. In e~her case, ~e ana~g,us~g the appropri~e ~afisfical ~chNques, can locam the respondents’ ideal poi~s rela-tive to ~e posNons of the various e~sting brands on ~e product space map.

Ano~ mNhod of asses~ng cu~omers’ p~mnces and trade-offs among them is a~atistical mctmNue ca~ed co~oint anNysis.~ Cu~omers are surveyed and asked ~ekpm~rences among various real or hypmheticN produ~ configur~ions, each w~h a~ribumsthat are systematically varied. By ana~Nng the ~sult~g d~a, the m~kNer can learnwNch of serum attribums are more impo~ant than ~e others. These ~s~ can then beused ~ po~fioNng ana~ses such as ~ose described here.

Whichev~ approach is use~ the ms~ will look som~hmg like Exh~R 7.7, whichshows a hyp~heticN c~ of ideal points for one segment of women’s-~othing con-sumps. As a group, this segment wo~d seem ~ p~r Nords~om ov~ any mh~ women~c~g ~mi~r on the map.

There are, howeve~ several reasons not all cu~omers m ~is segnmnt are like~ to pre-~r Nord~mm. Fi~ ~e ideal points of some customers a~ actual~ closer ~ Macy~ ~anNord~mm. Secon~ cu~omers whose ideN point is equiN~ant b~ween ~e two ~ores may

EXHIBIT 7.7P~p~M Map ~Women~ C~thingR~afle~ inWashington, ~C.,Showing the Ideal

Poin~ of a Segme~

of Consumes

Sot~ A~pted ~m ~ougl~~g~ ~d S~en AmN&~d~o~ How G~d A~~ey?’" ~hson College Reta~

~g R~rdl R~

SeNemb~ I~0. ~ntcd ~Nrm~.

Strate~k IssueUsing price as onedimenNon of a position-ing grid is ty~cal~ nctvery usefifl.

Chapter Seven Difforentiation and Positioning 165

W~h~ 1990 Womeffs ~bn ma~

~ The Umi~d~ N~man Mamus

Sa~ ¯ ~oomingd~e~

Macy~

¯ No~m

H~ or M~s ¯

¯ Ga~nk~s ¯ D~ssB~n ~J. Ma~ ¯

The Gap ¯ ¯Casu~ Com~ Sa~afras

L&T ~ Ma~h~¯ Heeh~s

¯ B~chesKmad ¯

¯W~dwa~

Sea~ &JC Penney Lo~p

~o~

Womeff~wear v~ue br ~eWo~ ~ ~

~ Be~ v~ue

Loehmann~

be relative~ inNffemnt in the~ choice of which store to p~ronize. And finally, customers

smn~imw eShen buyin~12w-inv°lvemeP nt’~mMze s~mSn°nduraNS e°meWh~g°°dfu s~he~raWase Yrvices--ff to°m theiad’sesi sdeal--partict~lth arlYe quMities of

new stores, to reassess older st~s from time to time, or ju~ for the sake of variety.Using price as one ~mension of a poNfion~g g~¢ or as a key dimensMn on which a

pmdu~ is poMtione& is typicM~ not very useful unle~ price is a key d6ver of the ma~kefing s~ateg~ This is the case for t~vo reasons. FirsB price is easi~ imi~Ne by competi-~rs. Unless the firm has a clear cost advantage over its competitor, by vi~ue of itsprocesses or o~r sources ofeffickncL using low price as a basis for poMfion~g can be afast mad m a price war that no one ~xcept consumerM will win. Secon& claims th~ one~product--whether a good or a ser~ce is low-priced me sometimes not very cre~Ne, be-cause so many marke~ make such chinas. It is often be~er to poMfion around mo~ en-during dift~mnti~ors, and let price speak more subtly for Rsel~ Wal-Mart, an exception,hac Sompareb deen ablte° i~Ochief competitorsS ,ustain ~s Mw-PriaCectuM~ ap reOSitioninl gowei~ the Uni~d States because its cons,

Step 6: Consider Fit of Possible Po~ons with CustomerNeeds and Segment Attrac~veness

bAny ~ffe~im mportant criterion for defining m~c ketu~om~s’ Because ~ffe~gmentsb iSetween cus~me~th,e ~ffe~ncid eea~pointth se benefire tSfle~ ~ris a_°Ught

fi°ndi S~n~ market ~grneni~ tsthe benefi~ ~ey a~eekw~l~a~aNth ~e pemeNed p~oP ~°sN°Mng ana~f ~ffemC ntan Mm~neousb lYrands. When cui s-demi~

mm~s’ ideal points c~s~r ~ t~vo w more locations on ~e product @~e map, ~e ana~

’1

164 Sec~on Two

Another concern is the dilution of an exi~ing intense position as a resu~ of consolida-tion. For example, British Leyland was formed through a series of merge~ involving anumber of British car manufacturers. For years, the company did not have a clear identitybecause it was new and manufactured a variety of brands, including Roveg Triump~ andAustin-Morris. Mo~ Europeans had difficuRy recalling spontaneously any British carmanufacturer Nnce once-strong brand names such as AuXin and Morris had lo~ the~ iden-tity and meaning. Since Ley~nd~ 1994 acquisition by BMW and the reintrodu~ion of theMini Coope~ the brand~ weak positioning may have strengthened some~vhat?~

Another danger assoc~wd with an in~nsely positioned brand is the temp~fion to ove~exploR th~ posRion by using the brand name on line ex~nsions and new products. Thedanger here is that the new products may not fit the ofiginN posRioning and the brand~s~ong image is d~uted. For examp~, in the late 1990s, the Holiday Inn Group offered trav-elers the cho~e of gaying in Holiday Imp, Holiday Im~ Express, Ho~day Inn Select, or Hol-iday hm Garden Court, each of which was at a differem price point and service offering.’~

Such a dive~e offering can be very confuNng to consumers.

Lim#ations of Product Positioning Analys&

The anNy~s depicted ~ Exh~R 7.5 is usuM~ m~wed to as productpositio~fing because

it ~Oc~es how aRern~Ne produ~s or brands are positioned mNfive to one m~mh~ ~ cus-

tomers’ n~nds. The proNmn with ~is ana~d~ ~ougK is Oat it does not WR ~e markemr

which portions are mo~ appeN~g m cugmne~.~ Thus, ~e is no way m demrm~e if

there is a markm for a new brand or ~ore ~ reign locNe ~ an "open" posR~n or

whe~er the cu~om~s in mh~ market segme~s pm~r brands or smms wRh ~ffemnt at-

tributes and positions. To salve such problems ~ is neeess~y m measure cus~m~s’ pro>erences and loc~e them ~ the product space along with the~ pemeptions of ~e positions

of e~sting brands. This is called a market positioning analysis. We deal wi~ Nis issuein Stop 5.

Step 5: Determine Customers’ Most Preferred Combina~on

of AttributesThere are several ways ana~s can measu~ cu~om~ p~nces and ~c~de them in apositioning ana~sis. For instance, survey respondents can be asked to think of ~e idealproduct or brand within a product category--a hypo~eficN brand posse~g the perfectcomb~n of a~ributes (~om ~he cu~omer~ !ewpoint). Respondents co~d ~en m~¯ ek ideN produ~ and e~sti~g produ~s on a number of a~ributes. An aR~n~Ne ~pproachis to ask ~spondents not on~ m judge the degree of ~mi~fity among paks of existingbrands but also to ~c~e ~ek degree of pm~nce for each. In e~her case, ~e ana~g,us~g the appropri~e ~afisfical ~chNques, can locam the respondents’ ideal poi~s rela-tive to ~e posNons of the various e~sting brands on ~e product space map.

Ano~ mNhod of asses~ng cu~omers’ p~mnces and trade-offs among them is a~atistical mctmNue ca~ed co~oint anNysis.~ Cu~omers are surveyed and asked ~ekpm~rences among various real or hypmheticN produ~ configur~ions, each w~h a~ribumsthat are systematically varied. By ana~Nng the ~sult~g d~a, the m~kNer can learnwNch of serum attribums are more impo~ant than ~e others. These ~s~ can then beused ~ po~fioNng ana~ses such as ~ose described here.

Whichev~ approach is use~ the ms~ will look som~hmg like Exh~R 7.7, whichshows a hyp~heticN c~ of ideal points for one segment of women’s-~othing con-sumps. As a group, this segment wo~d seem ~ p~r Nords~om ov~ any mh~ women~c~g ~mi~r on the map.

There are, howeve~ several reasons not all cu~omers m ~is segnmnt are like~ to pre-~r Nord~mm. Fi~ ~e ideal points of some customers a~ actual~ closer ~ Macy~ ~anNord~mm. Secon~ cu~omers whose ideN point is equiN~ant b~ween ~e two ~ores may

EXHIBIT 7.7P~p~M Map ~Women~ C~thingR~afle~ inWashington, ~C.,Showing the Ideal

Poin~ of a Segme~

of Consumes

Sot~ A~pted ~m ~ougl~~g~ ~d S~en AmN&~d~o~ How G~d A~~ey?’" ~hson College Reta~

~g R~rdl R~

SeNemb~ I~0. ~ntcd ~Nrm~.

Strate~k IssueUsing price as onedimenNon of a position-ing grid is ty~cal~ nctvery usefifl.

Chapter Seven Difforentiation and Positioning 165

W~h~ 1990 Womeffs ~bn ma~

~ The Umi~d~ N~man Mamus

Sa~ ¯ ~oomingd~e~

Macy~

¯ No~m

H~ or M~s ¯

¯ Ga~nk~s ¯ D~ssB~n ~J. Ma~ ¯

The Gap ¯ ¯Casu~ Com~ Sa~afras

L&T ~ Ma~h~¯ Heeh~s

¯ B~chesKmad ¯

¯W~dwa~

Sea~ &JC Penney Lo~p

~o~

Womeff~wear v~ue br ~eWo~ ~ ~

~ Be~ v~ue

Loehmann~

be relative~ inNffemnt in the~ choice of which store to p~ronize. And finally, customers

smn~imw eShen buyin~12w-inv°lvemeP nt’~mMze s~mSn°nduraNS e°meWh~g°°dfu s~he~raWase Yrvices--ff to°m theiad’sesi sdeal--partict~lth arlYe quMities of

new stores, to reassess older st~s from time to time, or ju~ for the sake of variety.Using price as one ~mension of a poNfion~g g~¢ or as a key dimensMn on which a

pmdu~ is poMtione& is typicM~ not very useful unle~ price is a key d6ver of the ma~kefing s~ateg~ This is the case for t~vo reasons. FirsB price is easi~ imi~Ne by competi-~rs. Unless the firm has a clear cost advantage over its competitor, by vi~ue of itsprocesses or o~r sources ofeffickncL using low price as a basis for poMfion~g can be afast mad m a price war that no one ~xcept consumerM will win. Secon& claims th~ one~product--whether a good or a ser~ce is low-priced me sometimes not very cre~Ne, be-cause so many marke~ make such chinas. It is often be~er to poMfion around mo~ en-during dift~mnti~ors, and let price speak more subtly for Rsel~ Wal-Mart, an exception,hac Sompareb deen ablte° i~Ochief competitorsS ,ustain ~s Mw-PriaCectuM~ ap reOSitioninl gowei~ the Uni~d States because its cons,

Step 6: Consider Fit of Possible Po~ons with CustomerNeeds and Segment Attrac~veness

bAny ~ffe~im mportant criterion for defining m~c ketu~om~s’ Because ~ffe~gmentsb iSetween cus~me~th,e ~ffe~ncid eea~pointth se benefire tSfle~ ~ris a_°Ught

fi°ndi S~n~ market ~grneni~ tsthe benefi~ ~ey a~eekw~l~a~aNth ~e pemeNed p~oP ~°sN°Mng ana~f ~ffemC ntan Mm~neousb lYrands. When cui s-demi~

mm~s’ ideal points c~s~r ~ t~vo w more locations on ~e product @~e map, ~e ana~

166 Section Two Oppo~unityAnalys~

EXHIBIT 7.8P~p~ Map ofWom~N ~othi~Reties ~

Washington, ~C.S~ ~veSegmen~ Based on

Ide~ Po~ts

~ ~ ~m Dou~ ~~ ~d S~ ~n~& ~’~a: How Good Are

~ ~~e~’ Babson College ~tail- = m

ONResearChsepmmber 1~ ~nted~R~~ ~

permi~m ~ ~

WasMn~on 1990 Women% fashion market

~ The UmRed

~ N~man Mamus 3

2Saks ¯ ~oom~gd~gs

Mac~s 4

¯ No~mm

H~ or M~s ¯

¯¯ Dress Barn ZJ. Maxx ¯

Ga~nk~sThe Gap ¯ ¯

Casu~ ComerSass~ms ~

L&T ~ Ma~h~¯ Hec~s

1 ¯ Bd~hes5 ¯

Wo~w~d

| Kma~ ¯Sea~ dC Penney L~hmp

Talb~s

Women’s-wear v~ue ~r the

Wor~value ~ ~ Be~value

, Loehman~s

can consider each clu~er a distinct market segment?~ For anNytical purpose~ each clu~eris represented by a circle that encloses most of the ideal points for that segment; the sizeof the drde reflects the rdative proportion of customers within a particular segment.

Exhib~ 7.8 groups the sample of Washington, D.C., respondents into five di~inct seg-ments on the basis of clugel’s of ideal points.~ Segment 5 contains the largest proportionof cu~omers; segment 1, the smallest?* By examining the preferences of cu~omers in digferent segments along w~h thek perceptions of the positions of existing brands, anNy~scan ~arn much about (1) the comp~itive ~rength of different brands in different segments,(2) the intensity of the fivaky between brands in a given segment, and (3) the opportuni-

ties for gaining a differentiamd pos~ion wRhin a specific target segment.Step 6 not only concludes the analy~s portion of the positioning process and crygab

lizes the decision about the positioning a product should hol~ but R also can uncover lo-cations in the product space where additionN new products could be positioned to servecustomer needs not wall served by current comp~Rors. Thus, ExhibR 7A shows that a pos-sible side benefit of the positioning process is recognition of underserved positions whereadditionN new products might be placed.

Step 7: Write Positioning Statement or Value Proposi~onto Guide Development of Marketing StrategyThe fin~ deci~on about where to poskion a new brand or repos~ion an existing one shouldbe based on bmh the markN targeting ana~Ns Oscu~ed in Chapter 6 and the results of amarket positioning analysis. The position chosen should m~ch the pre~rences of a particu-lar mark~ segment and should take into account the current positions of competing brands.

Chapter Seven Differentiation and Positioning 167

Under constant and ever in,easing pressure to per-form, the pharmaceutical indu~ is ffequent~ citedfor pra~kes that are ethically ques~ona~& An arti-cle in the Bdtish journal The Lancet is an asse~mentof adve~isemen% in Spanish medical journals in 1997for an~hype~ensNe (drugs used to treat high bloodpressure) and lipid lowering (i.e., cholesterol IoweFing) drugs. The adve~emen~ ~udied in a ~monthperiod (264 different ads for antihypertensNes and23 different ads for li~d-lowering drug~ made atotal of 125 referenced claims. After excluding the23 claims that did not have publNhed data, the

researchers found that 44 percent of the I~eraturedid not suppo~ the ~atemen% made in the ads. This~udy was a note of caution for doctors who pre-scribe medicines based on the evidence of reposedresearch on drugs.

Is such marketing really in the best ~ng-term in-

terests of the shareh~ders?

Source: ~lar Vil~nuev~ Salvador PeirO, Julian Librero,~macu~da Pereir& "Accu~cy of Pharmaceutical Adve~~sements in Medkal Journal~" The Lancet, January &2003. RepHnted by permiss~n.

Strategic IssueMost successRfl prod-ucts are positionedbased on one og at

mo~, two demrminantaUfibutes.

It should Nso reflect the current and,filtum a~racfiveness of the target markm (its size,expected growth, and envkonmentN constraintO and the rehtive s~engths and weaknessesof competitors. Such information, together with an analysis of the costs required to acquireand mNntain these position~ allows an assessment of the econom~ implications of digferent markm positioning ~rategies.

Most successful products are positioned based on one og at mo~, two determinant at-tributes, whether physicd or perceptuN. Using more simply confuses cu~omers. Domino ~Pizza in the Uni~d States, in its eaHy days, focused its positioning solely on its fa~ ddiv-er£ since that was the p~ncipN dimen~on on which it e~ab~shed its competitive advan-tage. While there are many things Domino~ could have said about the p~za ~selg for ex-amp~, R chose to focus ks positioning on its key point of differentiation: fast deliver~RecentlN when fa~ delivery became common in the p~za indu~ry, Domino~ added a heat re-mntion dev~e to ks ddivelT containers and added a second positioning attribute: hot. PapaJohn~, a more recent enfant in the p~za bu~nes~ positions ~s offering around a single at-tribute, the quality of ks pizz< with ks promotionN phrase, "Be~er ingredients. BeRet p~za?’

Where there are no real product differences, as in so-cN~d me-too produc~, or no digfel’entiN benefits to the user, not only N success hard to achieve, but aNo ethical issues mayarise. For an exampE of ethical issues involving positioning in the pharmaceutical indus-~> see Ethical Perspective 7.1.

Once the desked positioning for the product has been determine& it~ a good idea towrite ~ down so those charged with developing and imp~menting the marketing ~rmegyhave a clear understanding of what is intended for the product and where it will fit in ksCOlnpmitive set. Two approaches are commonly used for doing so. In the clasficN ap-proach, a positioning statement is wfi~en. A more recent approach, one being adop~d ina growing number of firms, involves w~ting a value proposition for the product.

Writing a Positioning Statement or a Value Proposition

A portioning ~atement is a sucdnct matement that identifies the target market for which

the product is intended and the product category in which ff competes and ~ates the unique

benefit the product offers. An example of a positioning ~atement that reflects Volvo~ mar-

keting ~rategy in the United States is shown in Exhib~ 7.9.

A v~ue proposition is simihrly exphcR about what the product does for the cu~omer

(and sometimes, what ~ does not do) and typically Mso includes information about pfidng

166 Section Two Oppo~unityAnalys~

EXHIBIT 7.8P~p~ Map ofWom~N ~othi~Reties ~

Washington, ~C.S~ ~veSegmen~ Based on

Ide~ Po~ts

~ ~ ~m Dou~ ~~ ~d S~ ~n~& ~’~a: How Good Are

~ ~~e~’ Babson College ~tail- = m

ONResearChsepmmber 1~ ~nted~R~~ ~

permi~m ~ ~

WasMn~on 1990 Women% fashion market

~ The UmRed

~ N~man Mamus 3

2Saks ¯ ~oom~gd~gs

Mac~s 4

¯ No~mm

H~ or M~s ¯

¯¯ Dress Barn ZJ. Maxx ¯

Ga~nk~sThe Gap ¯ ¯

Casu~ ComerSass~ms ~

L&T ~ Ma~h~¯ Hec~s

1 ¯ Bd~hes5 ¯

Wo~w~d

| Kma~ ¯Sea~ dC Penney L~hmp

Talb~s

Women’s-wear v~ue ~r the

Wor~value ~ ~ Be~value

, Loehman~s

can consider each clu~er a distinct market segment?~ For anNytical purpose~ each clu~eris represented by a circle that encloses most of the ideal points for that segment; the sizeof the drde reflects the rdative proportion of customers within a particular segment.

Exhib~ 7.8 groups the sample of Washington, D.C., respondents into five di~inct seg-ments on the basis of clugel’s of ideal points.~ Segment 5 contains the largest proportionof cu~omers; segment 1, the smallest?* By examining the preferences of cu~omers in digferent segments along w~h thek perceptions of the positions of existing brands, anNy~scan ~arn much about (1) the comp~itive ~rength of different brands in different segments,(2) the intensity of the fivaky between brands in a given segment, and (3) the opportuni-

ties for gaining a differentiamd pos~ion wRhin a specific target segment.Step 6 not only concludes the analy~s portion of the positioning process and crygab

lizes the decision about the positioning a product should hol~ but R also can uncover lo-cations in the product space where additionN new products could be positioned to servecustomer needs not wall served by current comp~Rors. Thus, ExhibR 7A shows that a pos-sible side benefit of the positioning process is recognition of underserved positions whereadditionN new products might be placed.

Step 7: Write Positioning Statement or Value Proposi~onto Guide Development of Marketing StrategyThe fin~ deci~on about where to poskion a new brand or repos~ion an existing one shouldbe based on bmh the markN targeting ana~Ns Oscu~ed in Chapter 6 and the results of amarket positioning analysis. The position chosen should m~ch the pre~rences of a particu-lar mark~ segment and should take into account the current positions of competing brands.

Chapter Seven Differentiation and Positioning 167

Under constant and ever in,easing pressure to per-form, the pharmaceutical indu~ is ffequent~ citedfor pra~kes that are ethically ques~ona~& An arti-cle in the Bdtish journal The Lancet is an asse~mentof adve~isemen% in Spanish medical journals in 1997for an~hype~ensNe (drugs used to treat high bloodpressure) and lipid lowering (i.e., cholesterol IoweFing) drugs. The adve~emen~ ~udied in a ~monthperiod (264 different ads for antihypertensNes and23 different ads for li~d-lowering drug~ made atotal of 125 referenced claims. After excluding the23 claims that did not have publNhed data, the

researchers found that 44 percent of the I~eraturedid not suppo~ the ~atemen% made in the ads. This~udy was a note of caution for doctors who pre-scribe medicines based on the evidence of reposedresearch on drugs.

Is such marketing really in the best ~ng-term in-

terests of the shareh~ders?

Source: ~lar Vil~nuev~ Salvador PeirO, Julian Librero,~macu~da Pereir& "Accu~cy of Pharmaceutical Adve~~sements in Medkal Journal~" The Lancet, January &2003. RepHnted by permiss~n.

Strategic IssueMost successRfl prod-ucts are positionedbased on one og at

mo~, two demrminantaUfibutes.

It should Nso reflect the current and,filtum a~racfiveness of the target markm (its size,expected growth, and envkonmentN constraintO and the rehtive s~engths and weaknessesof competitors. Such information, together with an analysis of the costs required to acquireand mNntain these position~ allows an assessment of the econom~ implications of digferent markm positioning ~rategies.

Most successful products are positioned based on one og at mo~, two determinant at-tributes, whether physicd or perceptuN. Using more simply confuses cu~omers. Domino ~Pizza in the Uni~d States, in its eaHy days, focused its positioning solely on its fa~ ddiv-er£ since that was the p~ncipN dimen~on on which it e~ab~shed its competitive advan-tage. While there are many things Domino~ could have said about the p~za ~selg for ex-amp~, R chose to focus ks positioning on its key point of differentiation: fast deliver~RecentlN when fa~ delivery became common in the p~za indu~ry, Domino~ added a heat re-mntion dev~e to ks ddivelT containers and added a second positioning attribute: hot. PapaJohn~, a more recent enfant in the p~za bu~nes~ positions ~s offering around a single at-tribute, the quality of ks pizz< with ks promotionN phrase, "Be~er ingredients. BeRet p~za?’

Where there are no real product differences, as in so-cN~d me-too produc~, or no digfel’entiN benefits to the user, not only N success hard to achieve, but aNo ethical issues mayarise. For an exampE of ethical issues involving positioning in the pharmaceutical indus-~> see Ethical Perspective 7.1.

Once the desked positioning for the product has been determine& it~ a good idea towrite ~ down so those charged with developing and imp~menting the marketing ~rmegyhave a clear understanding of what is intended for the product and where it will fit in ksCOlnpmitive set. Two approaches are commonly used for doing so. In the clasficN ap-proach, a positioning statement is wfi~en. A more recent approach, one being adop~d ina growing number of firms, involves w~ting a value proposition for the product.

Writing a Positioning Statement or a Value Proposition

A portioning ~atement is a sucdnct matement that identifies the target market for which

the product is intended and the product category in which ff competes and ~ates the unique

benefit the product offers. An example of a positioning ~atement that reflects Volvo~ mar-

keting ~rategy in the United States is shown in Exhib~ 7.9.

A v~ue proposition is simihrly exphcR about what the product does for the cu~omer

(and sometimes, what ~ does not do) and typically Mso includes information about pfidng

168 Sec~on Two OpportunityAnalys~

EXHIBIT 7.9

Positioning Statement

For upsca~ American families, Volvo ~ the automobi~that offe~ the utmo~ in safet~

P~itio~ng St~ement and Va~e Propofition ~r VoNo A~omobiles in lhe Un~ed Sta~s

Value Pmpos~on

¯ Ta~ ma~: U~le AmeH~n Families

¯ Ben~its offend: Safety

¯ Price range: 20% p~mium over similar cars

S~ategk IssueD is impo~am ~ ~epositioning aatement wvalue pmp~Non s~sbmmfiB ~at ~e u~r of¯ e pmdu~ will ohms,~ ~an ~at~ ~a~Hb~ of the productRselE

mlafive ~ competitors. B~h positioMng ~ements and va~e propositions shoOd gen~al~totem a unique selling proportion (USP) lh~ ~e pmdum embo~es. In this sense, theyreflect ~e basis on which ~e markemr intends to win susmina~e compm~ve advan~geby ~ffemnti~Mg the pmdu~ Dom mhers in its competitive space.

The notion of the USP has been ove~ol¢ howeveg as in maW pmdu~ c~egories, es-pecial~ mature ones, cu~omel’s are more impeded in the degree to which pa~produc~ meO ~eff ah=ady well-established needs m~er ~an the degree to which they ~ff~r ~om o~s. Newness and ~ffemntiation ~e nm always wh~ the cu~omer wan~! Weaddress this issue ~ the next section of this chapte~

A va~e proposition is anmher way to ckafly and succinctly ~e a produm~ position-~g. h~ i~ sbo~e~ form, a value propoMfion ty~cal~ looks like this:

¯ Ta~m ma~¯ Benefits offered (and not offere~¯ Price range ~daNe m comp~R~O

ExhibR 7.9 also provides a vNue proposition for Volvo. More ful~ developed valuepropositions sometimes identify ~e be~ competing almm~Nes avNNNe to ~e cu~omerand specify the benefits, ~ measumNe ~rms, th~ the cu~omer can expect ~ mceNe byusing ~e proposed product.~ DmN~d value proposRions such as ~ese are particularlyhe~ful in position~g indu~N goods and service~ where quantifiaNe customer benefitsare often essentiN m make the sNe.

It is impo~am ~ the positioNng ~ement or vahie proposition ~es benefits th~ the~ser of ~e product will obta~, ~r ~an ~atures cr a~bums of ~e product i~d~ orvague or amNguous ~udes about high quah~ or excd~m service. By benefits, wemean the resulting end-use measurable conseqnences th~ the user will experience ~rough¯ e use of ~e produm, ~ comparison to o~s.

The markm~ genem~y ~vrites positioning sta~ments and value propositions for use in-mrnN~ and by ~h~s, such as advelti~ng agende~ engaged to deve~p the marketing~r~egg They are sho~ and succ~ct, and are tyNca~y not wfi~en ~ c~chy consum~ lan-guage, though c~chy s~gans and tag fines for communication with cu~omers often fol-low. They are commonly w~en for a product fine or a bran< as is fl~e case in our Volvoexam~e, but sommimes for a sin~e produ~ or for a business as a whale. For produc~ orbrands, they play severn important ro~s. They provide ~mction for R&D and produ~ de-veMpment about wh~ ~nd ofa~ribu~s shoed be b~ ~m ~e produ~ ~door affbags,for examp~, ~ Volvo~ case). They pro~de ~m~ion for those who cre~e adve~N~g cam-pNgns about what ~e focus of those campNgns should be (for examp~, VoNo~ ads N-mo~ always focus on sa~, even though VoNo could say oth~ ~gs about ~s c~O. Thevalue proportion also pro~des Nrecfion for pfic~g ded~ons.

Thus, in a very mN ~n~, the posit~n~g ~emem or vahe proposNon constitutes theround,ion upon which the marketing s~amgy is bmR. More broaO> when used ~ thebusiness ~vel, as ~ey sommimes ~e, these ~eme~s a~N~e ~he ~r~eNc Nmction m-xvard which the company~ acfi~fies ~ all arenas should be Nmem& Promis~g a ce~a~

Chapter Seven Differentiation and Positioning 169

sort of positioning, or valne, to the m~get markm is one ~ing. DelNering it is anothm: Clearand concise po~fioNng ~Nements and value propos~ions can play important ro~s in e~fecfively executing Oe intended s~eg~

SOME CAVEATS IN POSITIONING DECISION MAKING

We no~d earlier in ~is chapmr ~ it~ generally deskaNe to identify a unique sellingproportion ~at cla~fies how the product is ~ffemntiated from o~s. A new book byPatrick Barwise and Sefin Meehan mEu~, howeveg teat contrary m conventional wisdom,buye~ oNy rare~ look ~r uNquene~. They argue %at the degree to which a brand cangrow to dominme its cmegory is a reflection of how many use~ in %e camgory be~eve itdehvers ~e main ca~gory benefit.~ The infini~mal ~ffemntiators Oat some m~kem~worry so much about make ~e ~ ~fl~nc~ ~ey say. Thus, marketing strategists should~cus ~eir effo~s on ddNe~ng ~e benefits ~ ma~ most ~ ~e ~Net customer---evenif other compe~tors do so as well--and not wo~y so much about invem~g tribal ~ffe>ences ~ don~ ~d~ m~

A second cavea is the ques~on of whether, ~ one is to ~fferentiate, the ~cus shouldbe on features--tangible a~butes of ~e good or s~!ce i~elg such as VoNo~ Nde-doorai~Sags and o~er sa~ features~r ~e benefts ~e ~atums deliver--~fet£ in Volvo~case. At the end of the day, cu~om~s buy what ~ey bu~ whe~ goods or ~r~ce~ ~order to ob~in c~ bene~s. They could care less about ~a~ms ~r thdr own sake.Thus, ~ the bene~s th~ ma~e~

But words a~ cheap, ~r markem~ as well ~ for politicians’ dec~om>e~ promi~s. Tobe ~eNNe ~ telling %e benefits s~r~ markO~s must back up ~dr words wiO ~a~ms¯ ~ actuary ddN~ ~e benefits ~a ~e promi~& The chal~nge ~r marketing str~eNsts,¯ en, is to keep benefits as ~e ~cus of ~e va~e propo~on and at ~e top of ev~yone~m~d-~eopywriters, sN~peoN< everyone who sells ~ one w~y cr another--but find away to emONy support and effe~Ne~ commuNcam ~e benefts ~at am c~imed. Doing

st21~SabouN tr m°rfeeam~di sNCUR ~alN n~ead of bene~sit,s°unds’ wNch is why so many ads and so many ~speoNe

ANALYTICAL TOOLS FOR POSITIONING DECISION MAKING

Throughout the positioning process, we have advocated collecting marketing research dataso positioning derisions are anchored in solid evidence, not mere supposition or naiveopinion. Advances in computing power and smtis6cal techniques have made possible abroad range oftooN to help the marketing dedMon maker make the be~ use of marketingresearch. We briefly outline a few of these tools in Exhib~ 7.10. It is beyond the scope ofthis book to provide detai~d instruction in the use of these and other ~afisticN ~chniques.Texts on marketing research and new product devdopment a~ good sources for additionaldepth in this areaY

168 Sec~on Two OpportunityAnalys~

EXHIBIT 7.9

Positioning Statement

For upsca~ American families, Volvo ~ the automobi~that offe~ the utmo~ in safet~

P~itio~ng St~ement and Va~e Propofition ~r VoNo A~omobiles in lhe Un~ed Sta~s

Value Pmpos~on

¯ Ta~ ma~: U~le AmeH~n Families

¯ Ben~its offend: Safety

¯ Price range: 20% p~mium over similar cars

S~ategk IssueD is impo~am ~ ~epositioning aatement wvalue pmp~Non s~sbmmfiB ~at ~e u~r of¯ e pmdu~ will ohms,~ ~an ~at~ ~a~Hb~ of the productRselE

mlafive ~ competitors. B~h positioMng ~ements and va~e propositions shoOd gen~al~totem a unique selling proportion (USP) lh~ ~e pmdum embo~es. In this sense, theyreflect ~e basis on which ~e markemr intends to win susmina~e compm~ve advan~geby ~ffemnti~Mg the pmdu~ Dom mhers in its competitive space.

The notion of the USP has been ove~ol¢ howeveg as in maW pmdu~ c~egories, es-pecial~ mature ones, cu~omel’s are more impeded in the degree to which pa~produc~ meO ~eff ah=ady well-established needs m~er ~an the degree to which they ~ff~r ~om o~s. Newness and ~ffemntiation ~e nm always wh~ the cu~omer wan~! Weaddress this issue ~ the next section of this chapte~

A va~e proposition is anmher way to ckafly and succinctly ~e a produm~ position-~g. h~ i~ sbo~e~ form, a value propoMfion ty~cal~ looks like this:

¯ Ta~m ma~¯ Benefits offered (and not offere~¯ Price range ~daNe m comp~R~O

ExhibR 7.9 also provides a vNue proposition for Volvo. More ful~ developed valuepropositions sometimes identify ~e be~ competing almm~Nes avNNNe to ~e cu~omerand specify the benefits, ~ measumNe ~rms, th~ the cu~omer can expect ~ mceNe byusing ~e proposed product.~ DmN~d value proposRions such as ~ese are particularlyhe~ful in position~g indu~N goods and service~ where quantifiaNe customer benefitsare often essentiN m make the sNe.

It is impo~am ~ the positioNng ~ement or vahie proposition ~es benefits th~ the~ser of ~e product will obta~, ~r ~an ~atures cr a~bums of ~e product i~d~ orvague or amNguous ~udes about high quah~ or excd~m service. By benefits, wemean the resulting end-use measurable conseqnences th~ the user will experience ~rough¯ e use of ~e produm, ~ comparison to o~s.

The markm~ genem~y ~vrites positioning sta~ments and value propositions for use in-mrnN~ and by ~h~s, such as advelti~ng agende~ engaged to deve~p the marketing~r~egg They are sho~ and succ~ct, and are tyNca~y not wfi~en ~ c~chy consum~ lan-guage, though c~chy s~gans and tag fines for communication with cu~omers often fol-low. They are commonly w~en for a product fine or a bran< as is fl~e case in our Volvoexam~e, but sommimes for a sin~e produ~ or for a business as a whale. For produc~ orbrands, they play severn important ro~s. They provide ~mction for R&D and produ~ de-veMpment about wh~ ~nd ofa~ribu~s shoed be b~ ~m ~e produ~ ~door affbags,for examp~, ~ Volvo~ case). They pro~de ~m~ion for those who cre~e adve~N~g cam-pNgns about what ~e focus of those campNgns should be (for examp~, VoNo~ ads N-mo~ always focus on sa~, even though VoNo could say oth~ ~gs about ~s c~O. Thevalue proportion also pro~des Nrecfion for pfic~g ded~ons.

Thus, in a very mN ~n~, the posit~n~g ~emem or vahe proposNon constitutes theround,ion upon which the marketing s~amgy is bmR. More broaO> when used ~ thebusiness ~vel, as ~ey sommimes ~e, these ~eme~s a~N~e ~he ~r~eNc Nmction m-xvard which the company~ acfi~fies ~ all arenas should be Nmem& Promis~g a ce~a~

Chapter Seven Differentiation and Positioning 169

sort of positioning, or valne, to the m~get markm is one ~ing. DelNering it is anothm: Clearand concise po~fioNng ~Nements and value propos~ions can play important ro~s in e~fecfively executing Oe intended s~eg~

SOME CAVEATS IN POSITIONING DECISION MAKING

We no~d earlier in ~is chapmr ~ it~ generally deskaNe to identify a unique sellingproportion ~at cla~fies how the product is ~ffemntiated from o~s. A new book byPatrick Barwise and Sefin Meehan mEu~, howeveg teat contrary m conventional wisdom,buye~ oNy rare~ look ~r uNquene~. They argue %at the degree to which a brand cangrow to dominme its cmegory is a reflection of how many use~ in %e camgory be~eve itdehvers ~e main ca~gory benefit.~ The infini~mal ~ffemntiators Oat some m~kem~worry so much about make ~e ~ ~fl~nc~ ~ey say. Thus, marketing strategists should~cus ~eir effo~s on ddNe~ng ~e benefits ~ ma~ most ~ ~e ~Net customer---evenif other compe~tors do so as well--and not wo~y so much about invem~g tribal ~ffe>ences ~ don~ ~d~ m~

A second cavea is the ques~on of whether, ~ one is to ~fferentiate, the ~cus shouldbe on features--tangible a~butes of ~e good or s~!ce i~elg such as VoNo~ Nde-doorai~Sags and o~er sa~ features~r ~e benefts ~e ~atums deliver--~fet£ in Volvo~case. At the end of the day, cu~om~s buy what ~ey bu~ whe~ goods or ~r~ce~ ~order to ob~in c~ bene~s. They could care less about ~a~ms ~r thdr own sake.Thus, ~ the bene~s th~ ma~e~

But words a~ cheap, ~r markem~ as well ~ for politicians’ dec~om>e~ promi~s. Tobe ~eNNe ~ telling %e benefits s~r~ markO~s must back up ~dr words wiO ~a~ms¯ ~ actuary ddN~ ~e benefits ~a ~e promi~& The chal~nge ~r marketing str~eNsts,¯ en, is to keep benefits as ~e ~cus of ~e va~e propo~on and at ~e top of ev~yone~m~d-~eopywriters, sN~peoN< everyone who sells ~ one w~y cr another--but find away to emONy support and effe~Ne~ commuNcam ~e benefts ~at am c~imed. Doing

st21~SabouN tr m°rfeeam~di sNCUR ~alN n~ead of bene~sit,s°unds’ wNch is why so many ads and so many ~speoNe

ANALYTICAL TOOLS FOR POSITIONING DECISION MAKING

Throughout the positioning process, we have advocated collecting marketing research dataso positioning derisions are anchored in solid evidence, not mere supposition or naiveopinion. Advances in computing power and smtis6cal techniques have made possible abroad range oftooN to help the marketing dedMon maker make the be~ use of marketingresearch. We briefly outline a few of these tools in Exhib~ 7.10. It is beyond the scope ofthis book to provide detai~d instruction in the use of these and other ~afisticN ~chniques.Texts on marketing research and new product devdopment a~ good sources for additionaldepth in this areaY

170 Se~ion Two OpportunityAnalys~

EXHIBIT 7.10 Sofm~ ~ols for Position~g D~n Making

Soffwa~ tools useful for making pos~oning ded~onsinclude appl~ations that identify impo~ant determinantattributes, as well as statistical appl~ations that can plotpositioning grids from market ~sea~h data.

Conjo~t analysis." As was men~oned in Step 5 of the

pos~oning proce~, it is impo~ant to ~arn wh~h key abtdbutes are impo~ant to consumer~ Co~oint analysis isone tool for doing so. Co~oint analysis determineswhich comMnation of a lim~ed number of at~ibutesconsumers mo~ p~fen The techn~ue B helpful for iden-tifying appea~ng new produd designs and impo~antpoinb that might be included in a produG~ adve~ng.A~hough it can pro~de some insigh~ about consumerprefe~nces, it cannot pro~de information about howconsumers pe~e~e the pos~oning of e~sting produds

in ~lation to produd ~men~ons. Conjoint analysis isone way to na~ow down a set of produd attributes tothose mo~ impo~ant to consider in produ~ design andpositioning ded~on~ Mo~ often, it is used with physical

attributes, nct pe~eptual ones. Seve~l wide~ used con-joint analysis ap~ations a~ av~b~ from SawtoothSoflwa~, Inc. (www.sawtoothso~ware.~om).

Factor analys~ and discriminant analysis: Factoranalysis and discriminant analysis are two ~atistical tech-niques useful in constructing positioning grids based onactual ma~eting ~sea~h data. They are included inmost broad-based sta~stical packages, such as SPSS MR(www.sp~s.¢om/spssm~. To employ factor ana~the analyst must first identi~ the salient at~butes con-sume~ use to evaluate products in the catego~ under~ud~ The ana~ then colle~s data from a sample ofconsumers concerning their ~ngs of each produ~ orb~nd on all attributes. The factor analysis prog~m next

determines which attributes are ~lated to the same un-derlying construd ("bad" on the same fadoO. The ana-

lyst uses those underling constructs of fado~ as the di-mensbns for a produd space map, and the prog~m

ind~ates whe~ each produG or b~nd is petered to belocated on each facton

DBcriminant analysis ~qui~s the same input data asfactor analysB. The d~criminant analysis prog~m thendetermines consume~’ pe~eptual ~men~ons on thebasis of which attributes be~ diffe~ntiat< or ~scrimPhate, among b~nds. Once again, those under,rig di-men~ons can be used to constru~ a produd space map,but they a~ usual~ not so early interpretable as the fac-to~ identified through factor analysB. Also, as with fac-tor anJys~ the underlying ~men~ons may be mo~ afund~n of the attributes used to collect consumer rabings than of the product cha~edstics that consumersadual~ consider to be mo~ impo~ant.

Multidimendonal scaling: Unlike the other techniquesin which the underling ~men~ons identified depend onthe attributes supplied by the ~sea~her when c~dingdata, mu~men~on~ scaling produces ~men~onsbased on consumer judgments about the ~milarity of, or

their prefe~nces fo~ the actual brands. These underling~men~ons a~ thought to be the basic ~men~ons that

consumers adual~ use to evaluate akerna~ve brands inthe produ~ class. Mu~men~ona scaling prog~msthat use data on ~mihdties construct geometrical~spaced maps on which the b~nds petered to be mo~similar are placed close together. Those that use con-sumer prefe~nces produce joint space maps that showconsumer ideal points and then position the mo~-preferred brands close to those ideal points.

Unfo~unate~ the under,rig ~men~ons of themaps produced by mu~men~onJ scaling can be diffi-cult to interpret. Also, the ~men~ons identified a~ on~those that al~ady exi~ for cu~entiy ava~b~ b~nds.This makes the tech~que less useful for investigatingnew produG concepts that might invoke new cha~tefistics. Rnally, the tech~que is su~e~ to statistical lim-kation% when the number of akernative brands beinginvestigated is small. As a rule, such techn~ues should

be applied only when at lea~ eight or mo~ dfffe~ntproduds or brands are being examined.

M~kedng

Plan Exercise

Wrim a positioNng sm~me~ and a value plopoMfion for ~e product(O m be m~k~e& Con~ru~one or more p~ceptuM maps or a va~e curve to clarify ~s positioNng versus compmim~.

1. GNen %e chM~n~s inh~em ~ mpo~Nng a N~-~od cha~, how wouN you N~Mr updme~e Subww pmdu~ line and advertising ~mpaign in fig~ of c~mm macro ~ends?

2. WMt ~ m~m ky a de~Nant attribute for a N~n pmdu~? Explain why the identification ofsuch aufibutes is so important. Wh~ wood be an exam~e of a d~m~m~ a~r~me ~r each of

¯ e ~ow~g products and service~a, A ~ li~eb. A la~op compm~

Chapter Seven Differentiation and Position~g 171

c. French wine

d. Women~ ~ortswe~e. A ho~ital£ A I~N a~s collegeg. A ~acmr

3. ShoOd positioning be based on product ~a~ms ~ beneN~ Why? Und~ wh~ ckcum~ancesshoed ~amms be Oe ~c~s of an adveN~ng ~mpNgn?

4. ~ mrms of pmNo~ng s~meg> whm is ~e mfionNe ~r ~e N~ ~m Nabi~o offe~ many dig~re~ brands wiNin &e cmck~ ca~gory, each of wNch is p~ceNed ~ berg on~ Ng~ dig~mm ~om ~e mh~ WEar ~e ~e advamages and limitat~ns of such a s~aegy?

Ad~fionM ~l~Nagnosfic questions to m~ your aNli~ to ap~y ~e analytical ~Ms and concep~ ~tNs chaN~ to ~rmeg~ decision maMng may be ~und at the book~ Web si~ at www.mhhe.com/wNk~0@

1.The Subway c~e examNe is drawn Dom ~a Pas~£ ’~ared of Subway Fame Toms HeaRhy

Li~sUle a Hea~ Walk Kickoff," The R~’te~: Vande~ MeN~I Cemeg Ocmb~ 3, 2003;CNN.com, ’gamd ~e Subw~ Guy, Supe~ff’ November 17, 2003, ~mme~n.~m/200M

SHOWBIZ/TV/ll/17/subw~y/g~o~ap/; and ~e Sub~vay Resta~a~ts Web si~ at ~su~vaj~com.2. A1 Ries and ~ck Trout, Pos~on~ The Ba~efor )btw Mind (New Yo~: Wam~ Book~ 1982).

3.For a ~u~n of ~e p~o~ng of industri~ goods, see Fr~erick E. We~ter, ~, ~&~a#’ialMarke~gSn~te~, (New Yo~: ~hn Wil~ & Sons, 1991L pp. 102-3.

4.M~had Po~eg "Wh~ ~ S~ategy?" Ham,a~ Business Rm,iem November-Decemb~ 1996, p. 62.

5. M~had Po~e~ Competiti~ Advantage (Ne~v Yo~: The Free Press, 1985).

6.Jonathan Wel~, "Drive Bud/Volvo XC90 An SUV Morn Sa~ than Sport~’ The Wall Street Jom~hal (U.S. Edit~, Novemb~ 29, 2002, p. W11C.

7.Adapted flora C. Merle Craw~r~ New Pro&mtManagem~t (Burr ~ge, IL: ~chard ~ I~vin,199~, ~ 348.

8.For a description of a p~c~m~ mapp~g w~edure ~ allows co~um~s ~ ~fibe and m~

¯ e ~an~ invol~d ~ thek own term~olog> see ~mB~e~ E M. Sm~kam~ Hans C. M. VanTripp, and ~s M. E Ten Be~e, "Perceptual Mapp~g Ba~d on Idiown~atic Sets of A~ibutes$’

Jo~mtal ofMarke~g R~e~w& February 1994, p. 15.

9.Dou~as ~gert and S~phen Arnd& "N~&~om: How Good Are They?" Babson College Rem~hg R~ewwh Rep~’ts, Se~emb~ 1990.

l~For mo~ on sgamg~maMng as choices, see Constanfinos C. Markides, Ad ~e Right Moves: AGuide ~ ~i~ ~’ea~hmugh St~e~y (Cambridge, MA: H~v~d Bu~n~s Scho~ P~ss,2000). For more on value curves, see W. Chart Kim ~d Ren~e Mauborgn< "Va~e Innovation:The S~a~g~ Logic of H~h Growth," Hatw~ff ~e~ Re~mv 0anuaw-Fe~u~£ 1997Lpp. 103-12.

11.S~ve Lyons, "The Ma~m~g 100--Fo~ Windstaff’ Adve~7~gAge, ~ne 26, 1995, p. S-27.

12.Lindsw Brooke, "Mini: The Re~ Story," Autot,mtive h~&~#qe& April 2002.

13.B~ce O~vall, "Mu~ng Ho~l Brands Puz~e Tr~de~ The I¥ctH SO~ Jot~mL Ap~ 17,1996, p. B1.

14.EM~ng Dan&’ a~mctiven~s ~n be ~rred ~om currem ~les vo~m~ and ma~ ~. Theposition ~cupied by ~e share leader is obvious~ more appeM~g to a gmm~ numb~ of cus-~m~s ~an are the pos~ions occup~d by Msser brands.

15. S~ PaO E. Gm~, k Dou#~ C~mR, and S~phen M. GoNb~ ’~ Genial Apwoach m Do&uct DeMgn Optimization v~ CoNoint A~lys~7 Jo~m~al of Marketing R~eww~ May 1985,

pp. 168-84; and L Dou~ Ca~Nl and Paul E. Green, ’~w~ommfic M~hods in MaNetingRe~amh: P~t I, Conjoint Analysis7 Journal of Marketing R~eww& No~mb~ 1995, p. 385.

16.When us~g pm~mnce dam m define market ~gmen~, howell ~e ana~ should also collect~formation about customers’ demogaphic ~arameri~cs, fi~s~ woduct ~ag< and o~ po-~nfial ~gmemation variant. TNs enaN~ ~e analyst m develop a more complete p~mm of~e

170 Se~ion Two OpportunityAnalys~

EXHIBIT 7.10 Sofm~ ~ols for Position~g D~n Making

Soffwa~ tools useful for making pos~oning ded~onsinclude appl~ations that identify impo~ant determinantattributes, as well as statistical appl~ations that can plotpositioning grids from market ~sea~h data.

Conjo~t analysis." As was men~oned in Step 5 of the

pos~oning proce~, it is impo~ant to ~arn wh~h key abtdbutes are impo~ant to consumer~ Co~oint analysis isone tool for doing so. Co~oint analysis determineswhich comMnation of a lim~ed number of at~ibutesconsumers mo~ p~fen The techn~ue B helpful for iden-tifying appea~ng new produd designs and impo~antpoinb that might be included in a produG~ adve~ng.A~hough it can pro~de some insigh~ about consumerprefe~nces, it cannot pro~de information about howconsumers pe~e~e the pos~oning of e~sting produds

in ~lation to produd ~men~ons. Conjoint analysis isone way to na~ow down a set of produd attributes tothose mo~ impo~ant to consider in produ~ design andpositioning ded~on~ Mo~ often, it is used with physical

attributes, nct pe~eptual ones. Seve~l wide~ used con-joint analysis ap~ations a~ av~b~ from SawtoothSoflwa~, Inc. (www.sawtoothso~ware.~om).

Factor analys~ and discriminant analysis: Factoranalysis and discriminant analysis are two ~atistical tech-niques useful in constructing positioning grids based onactual ma~eting ~sea~h data. They are included inmost broad-based sta~stical packages, such as SPSS MR(www.sp~s.¢om/spssm~. To employ factor ana~the analyst must first identi~ the salient at~butes con-sume~ use to evaluate products in the catego~ under~ud~ The ana~ then colle~s data from a sample ofconsumers concerning their ~ngs of each produ~ orb~nd on all attributes. The factor analysis prog~m next

determines which attributes are ~lated to the same un-derlying construd ("bad" on the same fadoO. The ana-

lyst uses those underling constructs of fado~ as the di-mensbns for a produd space map, and the prog~m

ind~ates whe~ each produG or b~nd is petered to belocated on each facton

DBcriminant analysis ~qui~s the same input data asfactor analysB. The d~criminant analysis prog~m thendetermines consume~’ pe~eptual ~men~ons on thebasis of which attributes be~ diffe~ntiat< or ~scrimPhate, among b~nds. Once again, those under,rig di-men~ons can be used to constru~ a produd space map,but they a~ usual~ not so early interpretable as the fac-to~ identified through factor analysB. Also, as with fac-tor anJys~ the underlying ~men~ons may be mo~ afund~n of the attributes used to collect consumer rabings than of the product cha~edstics that consumersadual~ consider to be mo~ impo~ant.

Multidimendonal scaling: Unlike the other techniquesin which the underling ~men~ons identified depend onthe attributes supplied by the ~sea~her when c~dingdata, mu~men~on~ scaling produces ~men~onsbased on consumer judgments about the ~milarity of, or

their prefe~nces fo~ the actual brands. These underling~men~ons a~ thought to be the basic ~men~ons that

consumers adual~ use to evaluate akerna~ve brands inthe produ~ class. Mu~men~ona scaling prog~msthat use data on ~mihdties construct geometrical~spaced maps on which the b~nds petered to be mo~similar are placed close together. Those that use con-sumer prefe~nces produce joint space maps that showconsumer ideal points and then position the mo~-preferred brands close to those ideal points.

Unfo~unate~ the under,rig ~men~ons of themaps produced by mu~men~onJ scaling can be diffi-cult to interpret. Also, the ~men~ons identified a~ on~those that al~ady exi~ for cu~entiy ava~b~ b~nds.This makes the tech~que less useful for investigatingnew produG concepts that might invoke new cha~tefistics. Rnally, the tech~que is su~e~ to statistical lim-kation% when the number of akernative brands beinginvestigated is small. As a rule, such techn~ues should

be applied only when at lea~ eight or mo~ dfffe~ntproduds or brands are being examined.

M~kedng

Plan Exercise

Wrim a positioNng sm~me~ and a value plopoMfion for ~e product(O m be m~k~e& Con~ru~one or more p~ceptuM maps or a va~e curve to clarify ~s positioNng versus compmim~.

1. GNen %e chM~n~s inh~em ~ mpo~Nng a N~-~od cha~, how wouN you N~Mr updme~e Subww pmdu~ line and advertising ~mpaign in fig~ of c~mm macro ~ends?

2. WMt ~ m~m ky a de~Nant attribute for a N~n pmdu~? Explain why the identification ofsuch aufibutes is so important. Wh~ wood be an exam~e of a d~m~m~ a~r~me ~r each of

¯ e ~ow~g products and service~a, A ~ li~eb. A la~op compm~

Chapter Seven Differentiation and Position~g 171

c. French wine

d. Women~ ~ortswe~e. A ho~ital£ A I~N a~s collegeg. A ~acmr

3. ShoOd positioning be based on product ~a~ms ~ beneN~ Why? Und~ wh~ ckcum~ancesshoed ~amms be Oe ~c~s of an adveN~ng ~mpNgn?

4. ~ mrms of pmNo~ng s~meg> whm is ~e mfionNe ~r ~e N~ ~m Nabi~o offe~ many dig~re~ brands wiNin &e cmck~ ca~gory, each of wNch is p~ceNed ~ berg on~ Ng~ dig~mm ~om ~e mh~ WEar ~e ~e advamages and limitat~ns of such a s~aegy?

Ad~fionM ~l~Nagnosfic questions to m~ your aNli~ to ap~y ~e analytical ~Ms and concep~ ~tNs chaN~ to ~rmeg~ decision maMng may be ~und at the book~ Web si~ at www.mhhe.com/wNk~0@

1.The Subway c~e examNe is drawn Dom ~a Pas~£ ’~ared of Subway Fame Toms HeaRhy

Li~sUle a Hea~ Walk Kickoff," The R~’te~: Vande~ MeN~I Cemeg Ocmb~ 3, 2003;CNN.com, ’gamd ~e Subw~ Guy, Supe~ff’ November 17, 2003, ~mme~n.~m/200M

SHOWBIZ/TV/ll/17/subw~y/g~o~ap/; and ~e Sub~vay Resta~a~ts Web si~ at ~su~vaj~com.2. A1 Ries and ~ck Trout, Pos~on~ The Ba~efor )btw Mind (New Yo~: Wam~ Book~ 1982).

3.For a ~u~n of ~e p~o~ng of industri~ goods, see Fr~erick E. We~ter, ~, ~&~a#’ialMarke~gSn~te~, (New Yo~: ~hn Wil~ & Sons, 1991L pp. 102-3.

4.M~had Po~eg "Wh~ ~ S~ategy?" Ham,a~ Business Rm,iem November-Decemb~ 1996, p. 62.

5. M~had Po~e~ Competiti~ Advantage (Ne~v Yo~: The Free Press, 1985).

6.Jonathan Wel~, "Drive Bud/Volvo XC90 An SUV Morn Sa~ than Sport~’ The Wall Street Jom~hal (U.S. Edit~, Novemb~ 29, 2002, p. W11C.

7.Adapted flora C. Merle Craw~r~ New Pro&mtManagem~t (Burr ~ge, IL: ~chard ~ I~vin,199~, ~ 348.

8.For a description of a p~c~m~ mapp~g w~edure ~ allows co~um~s ~ ~fibe and m~

¯ e ~an~ invol~d ~ thek own term~olog> see ~mB~e~ E M. Sm~kam~ Hans C. M. VanTripp, and ~s M. E Ten Be~e, "Perceptual Mapp~g Ba~d on Idiown~atic Sets of A~ibutes$’

Jo~mtal ofMarke~g R~e~w& February 1994, p. 15.

9.Dou~as ~gert and S~phen Arnd& "N~&~om: How Good Are They?" Babson College Rem~hg R~ewwh Rep~’ts, Se~emb~ 1990.

l~For mo~ on sgamg~maMng as choices, see Constanfinos C. Markides, Ad ~e Right Moves: AGuide ~ ~i~ ~’ea~hmugh St~e~y (Cambridge, MA: H~v~d Bu~n~s Scho~ P~ss,2000). For more on value curves, see W. Chart Kim ~d Ren~e Mauborgn< "Va~e Innovation:The S~a~g~ Logic of H~h Growth," Hatw~ff ~e~ Re~mv 0anuaw-Fe~u~£ 1997Lpp. 103-12.

11.S~ve Lyons, "The Ma~m~g 100--Fo~ Windstaff’ Adve~7~gAge, ~ne 26, 1995, p. S-27.

12.Lindsw Brooke, "Mini: The Re~ Story," Autot,mtive h~&~#qe& April 2002.

13.B~ce O~vall, "Mu~ng Ho~l Brands Puz~e Tr~de~ The I¥ctH SO~ Jot~mL Ap~ 17,1996, p. B1.

14.EM~ng Dan&’ a~mctiven~s ~n be ~rred ~om currem ~les vo~m~ and ma~ ~. Theposition ~cupied by ~e share leader is obvious~ more appeM~g to a gmm~ numb~ of cus-~m~s ~an are the pos~ions occup~d by Msser brands.

15. S~ PaO E. Gm~, k Dou#~ C~mR, and S~phen M. GoNb~ ’~ Genial Apwoach m Do&uct DeMgn Optimization v~ CoNoint A~lys~7 Jo~m~al of Marketing R~eww~ May 1985,

pp. 168-84; and L Dou~ Ca~Nl and Paul E. Green, ’~w~ommfic M~hods in MaNetingRe~amh: P~t I, Conjoint Analysis7 Journal of Marketing R~eww& No~mb~ 1995, p. 385.

16.When us~g pm~mnce dam m define market ~gmen~, howell ~e ana~ should also collect~formation about customers’ demogaphic ~arameri~cs, fi~s~ woduct ~ag< and o~ po-~nfial ~gmemation variant. TNs enaN~ ~e analyst m develop a more complete p~mm of~e

172 Section Two Opportunity Analysis

differences among benefit segments. Such information can be useful for developing advertising

appeals, selecting media, focusing personal selling efforts, and designing many of the other ele-

ments of a marketing program that can be effective in appealing to a particular segment.

17.The size of the individual circles in Exhibit 7.8 is fictitious and designed for illustrative purposes

only.

18.The map in Exhibit 7.8 shows five distinct preference segments but only one set of perceived

product positions. The implication is that consumers in this sample were similar in the way they

perceived existing brands but different in the product attributes they preferred. This is the most

cormnon situation; customers tend to vary more in the benefits they seek than in how they per-

ceive available products or brands. Sometimes, however, various segments may perceive the po-sitions of existing brands quite differently. They may even use different determinant attributes in

assessing these positions. Under such circumstances, a marketer should construct a separatemarket-positioning map for each segment.

19. Michael J. Lamming, Delivering Prqfitable liable (Cambridge, MA: Perseus Books, 1998).

20.Patrick Bar,vise and Sefin Meehan, Simply Better: Wim~ing and Keeping Customers by Deliver-

ing gqtat Matters Most (Cambridge, MA: Harvard Business School Press, 2004).

21. For extensive critical reviews of past marketing applications of these different approaches, see

John R. Hauser and Frank S. Koppleman, "Alternative Perceptual Mapping Techniques: Relative

Accuracy and Usefulness," Journal qfMarketing Research, November 1979, pp. 495-506; John W.

Keon, "Product Positioning: TRINODAL Mapping of Brand Images, Ad Images, and Consumer

Preference," Jomwal of Marketing Researck, November 1983, pp. 380-92; Paul E. Green, J. Doug-

las Carroll, and Stephen M. Goldberg, "A General Approach to Product Design Optimization via

Conjoint Analysis," Journal of Marketing Research, May 1985, pp. 168-84; Thomas W. Leigh,

David M. McKay, and John O. Summers, "Reliability and Validity of Conjoint Analysis and Self-

Explicated Weights," Journal of Marketing Research, November 1984, pp. 456-63; Paul E.

Green, "Hybrid Models for Conjoint Analysis: An Expository Review," Journal of Marketing Re-

seamh, May 1984, pp. 184-93; E. M. Steenkamp, Jan-Benedict, Hans C. M. Van Trijp, and Jos

M. E Ten Berge, "Perceptual Mapping Based on Idiosyncratic Sets of Attributes," Journal of

Marketing Research, February 1994, p. 15; and J. Douglas Carroll and Paul E. Green, "Psycho-

metric Methods in Marketing Research: Part I, Conjoint Analysis," Journal qflMarketing Re-searck, November 1995, p. 385.