Chapter 6 Flashcards
(20 cards)
Bottom of the pyramid
- In economics, the Bottom of the Pyramid is the largest, but poorest socio-economic group.
- In global terms, this is the 2.5 billion people who live on less than $2.50 per day.
- Opportunities for new models of doing business that deliberately target that demographic
- Several books and journal articles have been written on the potential market by members of business schools. Such as The Fortune at the Bottom of the Pyramid (by C.K. Prahalad of the University of Michigan)
Prahalad proposes
–That businesses, governments and donor agencies stop thinking of the poor as victims and start seeing them as resilient and creative entrepreneurs
–Value-demanding consumers
–He proposes the below benefits to multi-national companies who chose to serve these markets
•The poor today are the middle-class of tomorrow
•Poverty reducing benefits—work with civil society organizations and local governments to create new local business models
Chapter 6—Opening Vignette—1964 business called Blue Ribbon Sports started by Phil Knight and Bill Bowerman (recent graduates of Stanford’s Graduate School of Business) today known as NIKE, INc
–Saw an opportunity to design better running shoes in the US—having the shoes manufactured in Asia, (found a Japanese Company, Onitsuka Tiger) and selling them in America at prices lower than the German shoes
–Created an unique style/revolutionized the running shoe “the waffle outsole” (Bowerman’s wife’s, waffle iron was the driving force behind this new type of shoe and Bowerman added latex)
Launching and Expanding the Nike Brand
–1972 Olympic marathon was a pivotal year, four of the top seven finishers wore Nike shoes—(no longer had a relationship the Asian company)
–In 1974 the Nike brand was America’s best-selling training shoe
–Relationships with major sports figures, John McEnroe and Michael Jordan soon followed.
Nikes continued success
- Nike’s sucess continues to revolve around understanding a consumers’ needs/creating and developing product to benefit the consumer
- Started with meeting the needs of distance runner—better designed running shoe
- Knight/Bowerman understood – different groups of consumers—different market segments—have different wants and needs (tangible and intangible). In virtually any market (the buyers) if different segments can be clearly identified, specific products with specific marketing programs can be developed to meet both the physical needs emotional needs (celebrity spokespersons help to satisfy the emotional needs)
•Based on recent WSJ article about anime
Nike’s Continued Success
•Based on recent WSJ article
- Athletic Apparel Industry is projected to grow by 50% over the next (6) years in the US to $100ml
•Much of that growth
–Projected from consumers who are buying workout
Market segmentation and target marketing
- Market segmentation and target marketing—two of the most fundamental tools (product positioning, equally important—covered in next chapter)
- Provide the platform/framework on which effective marketing programs are built
- Successful marketers realize they cannot sell the same products/services to everyone
- Successful marketers have to look to identify potentially attractive market segments and most importantly prioritize and pursue the most attractive ones
3 good ways market segments can be defined
- Who the customers are
- Where they are
- How they behave
Why do today’s market realities makes segmentation imperative
•More Product-Markets are Maturing
•Population growth has slowed in many regions
•Social and economic forces have given rise to more expanding disposable incomes, higher educational levels more sophisticated consumers.
•Trend toward micro-segmentation—identifying a very small market segment—all about VALUE
–Marketers can then direct specific marketing actions to each micro-segment to maximize the effectiveness of every contact with each customer.
–Kevin Plank’s business–“Under Armour” started–T-shirt (sewn up in Lycra)—market segment—football players—consumer need—protection from heat exhaustion under their football pads
Communications Service Providers are starting to leverage micro-segmentation analytics to improve customer retentio
Choosing Attractive Market Segments—A Five-Step Process
•Most firms no longer aim a single product and marketing program at the mass market.
•Instead – marketers market to a number of homogenous segments on the basis of meaningful differences in benefits sought by different groups of customers.
–Select Market-Attractiveness and Competitive-Position Factors
–Weigh Each Factor
–Rate Segments on each factor, plot results on matrices
–Project future position for each segment
–Choose Segments to Target, Allocate Resources
Different Targeting Strategies
Different Company Objectives
- Niche-market
- Mass-market
- Growth-market
- Global market segmentation
Market segmentation
Division of the total market into smaller, relatively homogenous groups.
Why can’t we have a single marketing mix
With 6.5 billion people in the and world and 300 million in US, too many potential customers to attract with a single marketing mix
CRITERIA FOR EFFECTIVE SEGMENTATION
(4
-Segment must have measurable size and purchasing power.
•Marketers must find a way to promote effectively to and serve the market segment.
• Segment must be sufficiently large to offer good profit potential.
• Firm must aim for segments that match its marketing capabilities
The Market Segmentation Process (5)
- DEVELOP A RELEVANT PROFILE FOR EACH SEGMENT
- FORECAST MARKET POTENTIAL
- FORECAST PROBABLE MARKET SHARE
- SELECT SPECIFIC MARKET SEGMENTS
- Use Multiple Segmentation Bases/Descriptors
DEVELOP A RELEVANT PROFILE FOR EACH SEGMENT
• In-depth analysis that helps managers accurately match buyers’ needs with the firm’s offerings.
FORECAST MARKET POTENTIAL
Sets upper limit on potential demand and maximum sales potential.
FORECAST PROBABLE MARKET SHARE
Comes from analysis of competitors’ market position and development of marketing strategy.
SELECT SPECIFIC MARKET SEGMENTS
- Use demand forecasts and cost projections to determine return on investment from each segment.
- Assesses non-financial factors such as firm’s ability to launch product
Use Multiple Segmentation Bases/Descriptors
Flexibility helps marketers increase their accuracy in reaching the right markets.
