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Chapter 7
Targeting, and Positioning
Building the Right Relationships with the Right Customers

Learning Objectives

1. Explain how companies identify attractive market segments and choose a target marketing strategy. 2. Discuss how companies position their products for maximum competitive advantage in the marketplace.

Chapter Overview

The chapter emphasizes the key steps in target marketing: market segmentation, market targeting, and market positioning. Market segmentation provides a method to divide or segment the market into narrow segments (using a variety of different meaningful variables—these variables or bases are discussed at length in the chapter) that can be better reached with the resources of the marketer. Market targeting examines each of the designated segment’s attractiveness and chooses one or more that match the marketing desires and objectives of the organization. Various coverage strategies are explained and detailed. The concept of market positioning arranges for a product to occupy a clear, distinctive, and desirable place relative to competition. Various methods for achieving significant differentiation are explained and illustrated. The above three steps aid the marketer in effectively arranging the company’s marketing mix so that the likelihood of consumer response and competitive advantage is maximized by the organization.

Chapter Outline

1. Target Marketing
a. Market segmentation reveals the firm’s market segment opportunities. The firm now has to evaluate the various segments and decide how many and which segments it can serve best.

Evaluating Market Segments

b. In evaluating different market segments, a firm must look at three factors: segment size and growth, segment structural attractiveness, and company objectives and resources. i. The company must first collect and analyze data on current segment sales, growth rates, and expected profitability for various segments. ii. It will be interested in segments that have the right size and growth characteristics. But “right size and growth” is a relative matter.

c. The company also needs to examine major structural factors that affect long-run segment attractiveness. i. A segment is less attractive if it already contains many strong and aggressive competitors. ii. The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment. iii. The relative power of buyers also affects segment attractiveness. iv. A segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.

d. Even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources. i. Some attractive segments can be dismissed quickly because they do not mesh with the company’s long-run objectives. ii. Or the company may lack the skills and resources needed to succeed in an attractive segment.

Selecting Target Market Segments

e. A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. f. Target marketing can be carried out at several different levels. Figure 7.2 shows that companies can target very broadly, very narrowly, or somewhere in between.

i. Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different. ii. Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs separate offers for each.

1. By offering product and marketing variations to segments, companies hope for higher sales and a stronger...
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