Uncategorized – Page 3 – Marketing

Unit C.05 – Common Segmentation Approaches

February 26, 2020February 17, 2020 by christopher

What you’ll learn to do: describe common segmentation approaches

The next section of this module walks through several common approaches to market segmentation. Some approaches will probably seem familiar, or even obvious—like segmenting by gender or income level—but others, like “psychographic” segmentation, may not. These methods are common because they provide useful guidance to marketers about how to identify and reach prospective buyers.

It’s important to remember that there may be more than one “right” way to segment a market. Certainly there are more-effective and less-effective approaches for different products or services. Sometimes a segmentation strategy is effective for a while, but then something shifts and a new approach is needed. In that way, segmentation is like a compass for marketers: when your position or direction changes, you revisit market segmentation to fine-tune where you’re heading and how to get there. Different segmentation approaches applied individually or together help refine a marketer’s understanding of the target market.

Common Approaches to Market Segmentation

Segmentation starts by identifying all the potential buyers for your product: individuals with the need and the means to buy what you offer. In most cases, this represents a large universe of people or organizations that are similar in some ways but different in many other ways. Segmentation is a process that helps marketers narrow their focus on the most promising groups within that universe.

There is no single correct way to segment a market. Defining a target consumer base can be performed using a variety of segmentation methods. Several common methods are discussed below. Marketers may apply a combination of these methods to provide greater insight into their target market and the customers they want to serve. In fact, good marketers generally try out different methods and combinations to figure out what approach is most successful to help them achieve their goals. Because people and their needs change, effective approaches for segmenting a market can also evolve over time.

The following is a list of common market segmentation approaches:

Geographic: nations, states, regions, cities, neighborhoods, zip codes, etc.
Demographic: age, gender, family size, income, occupation, education, religion, ethnicity, and nationality.
Psychographic: lifestyle, personality, attitudes, and social class.
Behavioral: user status, purchase occasion, loyalty, readiness to buy.
Decision maker: decision-making role (purchaser, influencer, etc.)

Geographic Segmentation

Photograph of seven surfboards leaning against a wooden fence on a beach.

You’re much more likely to sell surfboard in a location with a beach than in a landlocked location.

Geographic criteria—nations, states, regions, countries, cities, neighborhoods, or zip codes–define geographic market segments. Geography represents the oldest basis for segmentation. Regional differences in consumer tastes for products are well known, such as the affinity for barbecue in the southern U.S. or preferences for health-conscious menus in coastal California. Geographic segmentation suggests that in areas prone to rain, for instance, you can sell things like raincoats, umbrellas, and rubber boots. In hot regions, you can sell summer wear; in cold regions, you can sell warm clothes.

Geographic markets are easily identified, and large amounts of data are usually available. Many companies simply do not have the resources to expand beyond local or regional areas, so they must focus on one geographic segment only. There is very little waste in the marketing effort, in that the product and supporting activities such as advertising, physical distribution, and repair can all be directed at the customer. Further, geography provides a convenient organizational framework. Products, salespeople, and distribution networks can all be organized around a central, specific location.

The drawbacks of using a geographic basis for segmentation are also worth noting. There is always the possibility that consumer preferences aren’t dictated by location—other factors, such as ethnic origin or income, may be more important. The stereotypical Texan, for example, is hard to find in Houston, where one-third of the population has immigrated from other states. Another problem is that geographic areas can be defined as very large, regional locations. Members of a geographic segment may be too heterogeneous to qualify as a meaningful target market.

Demographic Segmentation

Demographics are statistical data that describe various characteristics of a population. Demographic segmentation consists of dividing the market into groups based on demographic variables such as age, gender, family size, income, occupation, education, religion, political opinions, ethnicity, and nationality. Demographic segmentation variables are among the most popular bases for segmenting customer groups because demographic data are plentiful and customer wants and needs often link closely to these variables.

For example, the youth market (roughly ages five to thirteen) not only influences how their parents spend money, but also how they make purchases of their own. Manufacturers of products such as toys, records, snack foods, and video games have designed promotional efforts directed at this group. “Tweens” are children between the ages of eight and twelve who are discovering what it means to be a consumer and are shaping the attitudes and brand perceptions they will carry with them as they grow up and gain more purchasing power. The elderly market (age sixty-five and over) has grown in importance for producers of products such as low-cost housing, cruises, hobbies, and health care.

DOVE SHAMPOO

The following advertisement illustrates how the advertising and marketing promotion of Dove’s Men+Care product line focuses on the unique needs and interests of the young to middle-aged male segment.

Life stage is another demographic trait associated with age, gender, marital, and family status. There is evidence that individuals and families go through predictable behavioral patterns associated with buying behaviors. For example, a young couple with one young child has far different purchasing needs than empty-nesters in their late fifties or single, middle-aged professionals.^[1]

Income is perhaps the most common demographic basis for segmenting a market because it indicates who can or cannot afford a particular product. It is quite reasonable, for example, to assume that individuals earning minimum wage could not easily purchase a $80,000 sports car. Income is particularly useful as a segmentation input as the price tag for a product increases. It can also be helpful in understanding certain types of buying behavior, such which income groups are most prone to use coupons.

Similarly, other demographic characteristics can influence other types of consumer activities.

Despite the apparent advantages of demographic segmentation (i.e., low cost and ease of implementation), uncertainty exists about its effectiveness. The method can be misused. For example, it might be said that the typical consumer of Thai food is under thirty-five years of age, has a college education, earns more than $10,000 a year, lives in a suburban fringe of a moderate-size urban community, and resides in the West. While these characteristics may describe a typical consumer of Thai food, they also describe many other consumers and may paint an overly broad or inaccurate portrait of a supposed “segment.” When a segment is too broad, it loses its defining characteristics and there isn’t much to differentiate the target segment from the general population. In this situation, the segmentation approach does not provide much useful guidance to help marketers make effective marketing choices.

Psychographic Segmentation

In psychographic segmentation, consumers are divided according to common characteristics in their lifestyle, personality, attitudes, and social class. Evidence suggests that attitudes of prospective buyers toward certain products influence their subsequent purchase or nonpurchase of them. If persons with similar attitudes can be isolated, they represent an important psychological segment. Attitudes can be defined as predispositions to behave in certain ways in response to given stimulus.^[2]

For market segmentation purposes, personality is defined as long-lasting characteristics and behaviors of a person that shape how they cope and respond to their environment. Consumption of particular products or brands relates to consumer personality. For example, risk-seeking individuals are attracted to extreme sports and travel, and extroverts tend to dress conspicuously.

Social class segmentation identifies individuals based on a combination of socioeconomic such as education, occupation, income, family background, and attitudes related to these factors.

Lifestyle segmentation refers to the orientation that an individual or a group has toward consuming products, work, and play and can be defined as a pattern of attitudes, interests, and opinions held by a person. Lifestyle segmentation has become very popular with marketers, because of the availability of consumer data, measurement devices and instruments, and the intuitive categories that result from this process.^[3] As a result, producers target versions of their products and their promotions to various lifestyle segments. For example, U.S. companies like All State Insurance are designing special programs for the good driver, who has been extensively characterized through a lifestyle segmentation approach.^[4]

Lifestyle analysis generally begins by asking questions about the consumer’s activities, interests, and opinions. If a woman earns $100,000–$150,000 per year as an executive, is married and has two children, what does she think of her roles as a professional, a wife, and a mother? How does she spend her spare time? To what groups does she belong? What does she read? How does she use electronic devices? What brands does she prefer, and why? AIO (activities, interests, opinions) inventories, as they are called, reveal vast amounts of information concerning attitudes toward product categories, brands within product categories, and user and non-user characteristics.

Overall, psychographic segmentation tends to focus on how people spend their money; their patterns of work and leisure; their major interests; and their opinions of social and political issues, institutions, and themselves. While it can create intuitive groupings and useful insights into consumer behavior, it can also take significant research and effort to inform a more complex and nuanced approach to defining market segments.

Behavioral Segmentation

Silhouette of a man in a suit walking in an airport pulling a small suitcase. Consumers are divided into groups according to common behaviors they share. Typically these behaviors link to their knowledge of, attitude toward, use of, or response to a product.

The most common type of behavioral segmentation is around user segments. In 1964, the market researcher Twedt made one of the earliest departures from demographic segmentation when he suggested that the heavy user, or frequent consumer, was an important basis for segmentation. He proposed that consumption of a product should be measured directly to determine usage levels, and that promotion should be aimed directly at the heavy user. This approach has since become very popular. Considerable research has been conducted on “heavy users” of a variety of products. The results suggest that finding other characteristics that correlate with usage rate often greatly enhances marketing efforts.^[5]

Other behavioral bases for market segmentation include the following:

User status: Looking beyond “heavy users,” it can also be helpful to identify segments based on a broader set of use patterns, such as non-users versus ex-users, or one-time users versus regular users. Mobile phone service providers examine usage patterns to create optimal plans and targeting based on specific sets of user needs: family plans, individual plans, no contract plans, unlimited talk and data plans, and so forth. New car producers have become very sensitive to the need to provide new car buyers with a great deal of supportive information after the sale in order to minimize unhappiness after the purchase.
Purchase occasion: This approach tries to determine the reason or occasion for purchasing a product and how it will be used. For example, airlines typically segment customers based on the reason for a passenger’s trip: business versus personal travel. Someone traveling for business generally has different needs and wants from someone traveling for pleasure. A business traveler tends to be less sensitive about price and more focused on timing, location, and convenience.
Loyalty: This approach places consumers in loyalty categories based on their purchase patterns of particular brands. A key category is the brand-loyal consumer. Companies have assumed that if they can identify individuals who are brand loyal to their brand, and then delineate other characteristics these people have in common, they will locate the ideal target market. There is still a great deal of uncertainty about the most reliable way of measuring brand loyalty.
Readiness: Readiness segmentation proposes that potential customers can be segmented according to how ready they are to purchase a product: unaware, aware, informed, interested, desirous, and intend to buy. Using this approach, a marketing manager can design the appropriate market strategy to move them through the various stages of readiness. These stages of readiness are rather vague and difficult to measure accurately, but readiness may be a useful lens for understanding the customer’s mindset and how to nudge them toward buying, particularly when an education process is required prior to purchase.

Decision-Maker Segmentation

This segmentation approach groups people according to who makes the purchasing decision in an organization or household. Typically there is a “primary buyer”: the individual who makes the final decision about what to buy and allocates the budget for the purchase. Many purchasing decisions also involve “influencers.” These are people who do not make the final purchasing decision, but they can influence the final choice about what to buy.

Toddler adds a box of crackers to a kid-size grocery shopping cart.

In families, for example, young children may be influencers in whether a parent buys Cheerios, Chex, or Fruit Loops. In companies, a department manager may be the primary buyer for a software product, but that manager’s work team may influence product selection by helping evaluate options to determine which choice best fits their needs. Segmentation by decision-making role helps marketers understand who truly matters in the purchase process and home in on the individuals who matter most.

Segmenting Business-to-Business Markets

All of the segmentation approaches above apply to consumer markets. There are many similarities between consumer and business behavior, and therefore similar segmentation bases and variables apply. Common business segmentation approaches include:

Organization size: segmentation according to large, medium, and small customers by revenue, by number of employees, by geographic reach, etc.
Geography: organizing segments based on geographic location
Industry: segmenting by the industrial sector an organization operates within—for example manufacturing, retail, hospitality, education, technology, health care, government, professional services, and so forth
User status: usage frequency, volume used, loyalty, longevity, products already in use, readiness to buy, etc. For example, longtime loyal customers with “strategic” relationships are often handled differently and receive preferable terms compared to newer customers.
Benefits sought: grouping customers by common elements they look for in a product or purchasing experience
End use: identifying segments based on how they plan to use the product and where it fits into their operations and supply chain. For example, an electric motor manufacturer learned that customers operated motors at different speeds. After making field visits and confirming these uses, he thought to divide the market into slow-speed and high speed segments. In the slow-speed segment, the manufacturer emphasized a competitively priced product with a maintenance advantage, while in the high-speed market product, superiority was stressed.
Purchasing approaches: organizing the market according to the way in which organizations prefer to make purchases; those preferences, in turn, determine how the seller builds the relationship with the customer and works the deal.

Combining Multiple Bases for Segmentation

Marketers may find it most useful to combine different bases for segmentation in order to create a richer picture of their target market. For example, a “geo-cluster” approach combines demographic data with geographic data to create a more accurate profile of a specific consumer. Geographic data combined with behavioral data can point companies toward locations where customers are clustered who demonstrate behaviors that make them a good target for a company’s product. Overlaying demographic data onto lifestyle or behavioral segments helps marketers understand more about their target customers and how to reach them effectively with the marketing mix.

Any of these approaches may be the “right” approach for a given company and product set. It is also important for marketers to continually evaluate what’s happening in their target market and to adjust their segmentation approach as customer attitudes, behaviors, and other market dynamics evolve.

William R. Darden, W.A. French, and R.D. Howell, “Mapping Market Mobility: Psychographic Profiles and Media Exposure,” Journal of Business Research, Vol. 7, No.8, 1979, pp. 51-74. ↵
Martha Farnsworth, “Psychographies for the 1990s,” American Demographics, July 1989, pp. 25, 28-30. ↵
William D. Wells, “Psychographies: A Critical Review,” Journal 0f Marketing Research, May 1975, pp. 196-213. ↵
Joseph T. Plummer, “The Concept and Application of LifeStyle Segmentation,” Journal of Marketing, January 1974, p. 33. David J. Reibstein, Christopher H. Lovelock, and Ricardo de P. Dobson, “The Direction of Causality Between Perceptions, Affect, and Behavior: An Application to Travel Behavior,” Journal of Consumer Research, Vol 6., March 1980, pp. 370-376. ↵
Ronald J. Frank, William Massey, and Yoram Wind, Market Segmentation, Englewood Cliffs, N.J.:Prentice-Hall, 1972. II. ↵

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This courseware was assembled by Christopher VanOosterhout from a variety of resources copyrighted and openly licensed by multiple individuals and organizations. See our Copyright and Attribution page for additional details. For details about permission to use please contact me at c@vanosterhout.com with the phrase Courseware Usage Inquiry. If you believe that this courseware violates your copyright, please contact me at c@vanoosterhout.com with the phrase Copyright Inquiry in the subject. Details about the collector of these resources and Licentia LLC can be found at www.vanoosterhout.com

Unit C.09 – Case Study: eHarmony Targets Women

February 26, 2020February 17, 2020 by christopher

Segmentation Success: A Dating Web Site for Women

When it was launched in 2000, eHarmony quickly made its mark as a new brand and new category in the online dating landscape: a dating site for the serious relationship seeker, particularly women. By focusing on women as its target segment, eHarmony made wise, profitable choices about its product and user experience to address this group’s unique needs.

eHarmony entered an online market dominated by two well-established brands, Match.com and Yahoo, and it seemed to violate all the standard practices and conventional wisdom of the industry at the time. Unlike other dating sites, eHarmony decided not to allow users to search and browse their Web site for potential mates. Instead, it requires participants to complete an exhaustive questionnaire before they can receive any information about prospective suitors.

This process creates a much better user experience for eHarmony’s target demographic in a couple ways. First, women don’t feel like they are being judged solely on their looks. They perceive that they are being matched according to a complex array of compatibility criteria—not just superficial markers like age or income. Second, the entire eHarmony process is very time-consuming. It takes at least forty minutes to fill out the initial questionnaire, and users must court their potential mates through a series of essay questions and then write reviews of any contenders. By making the process so time-consuming, eHarmony has the natural effect of weeding out non-serious users and helping women to feel less vulnerable. This makes the product much better for the serious female relationship seeker who doesn’t want to waste time on or take a chance with casual dating.

In the following eHarmony ad, notice how the company differentiates itself from competitors:

The result of creating a product suited to women seeking marriage or long-term relationships has had two huge financial benefits for eHarmony. First, they can charge much more and enjoy much better margins than competitors. Because the customer perceives more value in being matched with a “soul mate” than in just being helped to “find a date,” eHarmony is able to charge more than other dating sites ($50 per month versus $20 per month). Second, eHarmony is able to generate revenue from women users much more effectively than other dating sites (many of which make most of their money on men): almost 60% of eHarmony’s paying users are women.

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Unit C.07 – Segmentation Decisions

February 17, 2020February 17, 2020 by christopher

What you’ll learn to do: explain the process of selecting an appropriate segmentation approach and deciding which customer segments to target for marketing activities

Now that you’ve learned about common segmentation approaches, how do you know when to apply them? When is geographic segmentation a better fit than demographic segmentation? When should you consider using both at the same time?

It comes down to your marketing goals: What are you trying to achieve?

The following section explains the process of aligning your goals with your segmentation approach and target market.

Conducting a Market Segmentation

Photo of three young women dressed in Goth outfits walking outside in a city. As you have seen, there are many different ways a company can segment its market, and the optimal method varies from one product to another. Good market segmentation starts by identifying the total market for the product: all the individuals who might conceivably need a product and have the means to purchase it. The total market for accounting software, say, is different from the total market for Lego building sets or the total market for chewing gum.

The next step is to identify marketing goals you want to achieve with the segmentation strategy. Do you want to generate awareness and sales in a local community that has never heard of your company? Do you want to get occasional customers to buy your product regularly? Do you want loyal supporters to dig deeper into their pockets and spend more of their money on your goods or services? Your segmentation approach should offer the best fit for your specific marketing goals.

Your marketing goals point you toward the segmentation criteria that will be most useful to achieve your marketing objectives. For example, if your goal is to build loyalty or increase frequency of purchase, behavioral segmentation is important to consider. If your goal is to broaden your customer base within a given region, geographic segmentation may be useful.

As you identify segmentation criteria that will help you understand the total market and meet your marketing goals, you’ll develop the basis for your segmentation approach. Next, you conduct research to collect segmentation data. Analyzing the market data can tell you whether your segmentation approach makes sense and where you may need to adjust the criteria to yield useful, valid market-segment data.

After conducting research and analysis of segmentation data, you should be able to diagram and profile different segments within your total market. A typical segmentation diagram could look like this:

Chart titled Sample Market Segment Profiles: Family Life Stages Segments. Left-most Column is Young Singles (10%). Frequency of going out for fun: 4 outings per week. Preferred destination: bar, clubs, movies, restaurants. Common reasons to go out: Happy Hour, weekend, dating, see friends. Average expenditure per outing: $25. Second column is Young Couples, No Kids (8%). Frequency of going out for fun: 2 outings per week. Preferred destination: Restaurants, movies, live music. Common reasons to go out: weekend, anniversary, birthday, see friends. Average expenditure per outing: $43. Third column is Young Families (28%). Frequency of going out for fun: 3 outings per month. Preferred destination: parks, movies, museums, family-friendly restaurants. Common reasons to go out: birthday, anniversary, date night. Average expenditure per outing: $57. Fourth column is Families with older kids (31%). Frequency of going out for fun: 4 outings per month. Preferred destination: movies, restaurants, sporting events. Common reasons to go out: birthday, anniversary, date night, kids’ performances. Average expenditure per outing: $64. Fifth column is Empty nesters (23%). Frequency of going out for fun: 3 outings per week. Preferred destination: movies, restaurants, cultural events. Common reasons to go out: birthday, change of scenery, see friends. Average expenditure per outing: $12.

Evaluating Your Segmentation Approach

An ideal market segment meets all of the following conditions:

It’s possible to measure. If you can’t measure it, you can’t collect data to know who the segment is or how to reach them.
It’s profitable. Segments must have the resources to purchase the product and be large enough to earn a profit for the company; otherwise they aren’t worth pursuing.
It’s stable. Segments need to stick around long enough for you to execute your marketing plan.
It’s reachable. It must be possible for marketers to reach potential customers via the organization’s promotion and distribution channel(s).
It’s internally homogeneous. Potential customers in the same segment must prefer the same product qualities and exhibit similar characteristics that are pertinent to the segmentation approach.
It’s externally heterogeneous. Potential customers from different segments have different product quality preferences and characteristics that affect their purchasing decisions.
It’s responsive. Segments should respond consistently to a given market stimulus or marketing mix. If they do not, then marketing efforts directed at them will not be well spent.
It’s cost-effective. Worthwhile market segments can be reached by marketing activities in a cost-effective manner. If too expensive to reach, then serving this segment will negatively impact profits.
It helps determine the marketing mix. Ideally, when you have identified a market segment, you’ll have insight into ways of shaping the combination of product, promotion, price, and place to fit that segment’s needs.

If your segmentation approach fails to meet any of these conditions, you should go back to the drawing board to refine it. If any one of these factors is not in place, your market segmentation may actually undermine the effectiveness of your marketing and business. But with all these factors in place, market segmentation will point you toward the most promising customer groups in your target market.

For example, if you’re trying to launch a print services company in a large city, targeting “all business owners” isn’t cost effective, and the individuals within this group are actually quite different. That means that no single marketing mix will be effective with everyone in this segment. Instead, you would be better served by researching types of businesses (by industry, size, etc.), geographic locations, and other relevant factors to help you identify and target logical segments with shared characteristics.

Keep in mind that market segmentation is an ongoing activity that needs periodic evaluation to ensure that the approach still makes sense. Since markets are dynamic and people and products change over time, the basis for segmentation must also evolve.

Selecting Target Segments

Photo of Rolex wristwatch

Rolex focuses on a single market segment—those who want a luxury watch—and is thus a prime example of the concentration strategy of market segmentation.

Once an actionable segmentation approach is in place, marketing organizations typically follow one of two major segmentation strategies: a concentration strategy or a multisegment strategy.

In the concentration strategy, a company chooses to focus its marketing efforts on only one market segment. Only one marketing mix is developed: the combination of product offerings, promotional communications, distribution, and pricing targeted to that single market segment. The primary advantage of this strategy is that it enables the organization to analyze the needs and wants of only one segment and then focus all its efforts on that segment. The primary disadvantage of concentration is that if demand in the segment declines, the organization’s sales and financial position will also decline.

In the multisegment strategy, a company focuses its marketing efforts on two or more distinct market segments. The organization develops a distinct marketing mix for each segment. Then they develop marketing programs tailored to each of these segments. This strategy is advantageous because it may increase total sales with more marketing programs targeting more customers. The disadvantage is the higher costs, which stem from the need for multiple marketing programs that may include segment-specific product differentiation, promotions and communication, distribution/delivery channels, and pricing.

How do you choose?

Selecting the target segments boils down the following questions, which connect to the “ideal segment” conditions listed above:

Whose needs can you best satisfy?
Who will be the most profitable customers?
Can you reach and serve each target segment effectively?
Are the segments large and profitable enough to support your business?
Do you have the resources available to effectively reach and serve each target segment?

As you answer these questions with regard to the different market segments you have defined, you will confirm which segments are most likely to be good targets for your product(s). These segments become your target market—the object of your targeting strategy, marketing mix, and marketing activities.

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Unit B.15 – Case Study: Chobani

February 26, 2020February 17, 2020 by christopher

In 2005, Turkish immigrant Hamdi Ulukaya bought a yogurt plant from Kraft Foods in Johnston, New York. Ulukaya had a vision of a better product: the thick, rich yogurt he had enjoyed in Turkey but couldn’t find in the United States.

The Target Customer

Chobani started out making private-label regular yogurts for other large companies, but Ulukaya believed he could make a better yogurt than the competition. And, he had a good idea of the customers he wanted to target:

We aimed at people who never liked yogurt. We couldn’t blame them, because what was available was not what the rest of the world was eating.

Further, the company chose not to target only women, a favorite target segment for the U.S. yogurt industry. Ulukaya believed that both men and women would appreciate the fresh ingredients and high protein that Chobani offered.

The Chobani Product

The recipe for Chobani is thicker and creamier than regular yogurt, with twice the protein and none of the preservatives and artificial flavors found in conventional yogurt. What’s in the yogurt—five live and active cultures, including three probiotics—is as important as what’s not, and Chobani turned this competitive advantage into the yogurt’s slogan: “Nothing but Good.” Ulukaya described the philosophy behind the product:

We look at our yogurt as pure, healthy, simple, and something that you enjoy tasting. That is very, very important for us.^[1]

The Chobani Place

Existing Greek yogurt lines were most often sold in expensive specialty stores. Ulukaya hoped to sell his yogurt brand to a wider customer base through mass-distribution channels of grocery store chains. After more than a year developing Chobani’s trademark taste, in October 2007 Chobani’s first shipment included five different flavors—blueberry, peach, strawberry, vanilla, and plain—which were sold to a single Long Island grocery store. From there the company expanded regionally and then nationally to grocery store chains. The demand for broader distribution was fueled by the promotion campaign.

The Chobani Promotion

Chobani worked to develop a two-way dialogue with happy customers.

We’re on all the major social media platforms. The growth of Chobani really started virally, where one person would try it, tell five friends who each told five friends, and it really became a brand people loved to discover on their own and tell other people about. In the online landscape, we just had really great success at being able to talk to our fans. I think one of the great things about our company is our relationship with consumers; it’s really a lot of fun to hear what they have to say and take it to heart.^[2] —Nicki Briggs, a registered dietitian and head of the company’s communications team

Ulakaya also became a darling of the business press, which was persuaded by his philosophy that anything is possible with hard work. He was a frequent guest on national investment news programs and speaker at business conferences.

The company capitalized on the healthy and ambitious aspects of its brand, and in 2012 Chobani became the official yogurt of the U.S. Olympic Team. As a sponsor, Chobani followed athletes from U.S. Olympic training centers to the London Olympic Games.

Since then Chobani has also visibly committed to supporting local farmers and strengthening economic growth in the communities where it is located, which contributes to its reputation as a healthy brand.

The Chobani Price

When Chobani entered the market, prices for the traditional offerings in the market clustered around 65 cents per cup. Premium Greek yogurt cost $1.34 per cup. ^[3]

Chobani priced its product at roughly $1 per cup. This decision was based on the expectation that the product would be successful. Ulakaya set the price assuming economies of scale—that the company would gain efficiencies as sales increased—instead of trying to recover the early costs. The price factored in the higher cost of premium ingredients, which also supported the product and promotion goals. ^[4]

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Unit C.11 – Targeting and Marketing Mix

February 26, 2020February 17, 2020 by christopher

What you’ll learn to do: explain how targeting influences each element of the marketing mix

Segmentation helps you decide who your target customers are, while targeting helps you zero in on the best method for reaching them. Your targeting strategy helps you set priorities for making an impact on your target segments and on the market as a whole. As you’ll see in this section, your targeting strategy also helps you determine which combination of product, promotion, place, and price—i.e., which marketing mix—will best fit the segments you are trying to capture.

Take a moment to watch the following video, which explains how the car company Toyota used segmentation and a new targeting strategy to improve a product (the first P of the marketing mix) and give it genuine family appeal.

Read the transcript of the video “Toyota Appeals to Kids.”

Using the Marketing Mix to Reach Target Segments

Once target segments are identified, the marketing manager selects a targeting strategy that will be the best fit for reaching them. Targeted marketing enables the marketing and sales teams to customize their message to the targeted group(s) of consumers in a focused manner. The targeting strategy is where the marketing mix comes together to create the right offer and marketing approach for each target segment. A summary of common targeting strategies is provided in the table below.

Strategy	Target Market	Example
Mass marketing	Everybody everywhere	Target
Differentiated marketing	Large groups within the total market	Costco, Sam’s Club
Niche marketing	High penetration within smaller, specialized segments	Trader Joe’s, Whole Foods
Micromarketing	Individual customers or localized microsegments	Groupon

Mass Marketing

Mass marketing, also called undifferentiated marketing, involves marketing to the entire market the same way. Mass marketing effectively ignores segmentation and instead generates a single offer and marketing mix for everyone. The market is treated as a homogeneous aggregate. Mass marketing aims to reach the largest audience possible, and exposure to the product is maximized. In theory, this would directly correlate with a larger number of sales or buy-in to the product.

Mass marketing tries to spread a marketing message to anyone and everyone willing to listen. Communication tends to be less personal, as evidenced by common mass-marketing tactics: national television, radio and print advertising campaigns; nationally focused coupons; nationally focused point-of-purchase displays. The success of mass-marketing depends on whether it is possible to reach enough people, through mass-communication techniques and one universal product offer, to keep them interested in the product and make the strategy worthwhile. While mass-marketing tactics tend to be costly because they operate on a large scale, this approach yields efficiencies and cost savings for companies because it requires the marketing team to execute only one product offer and marketing mix.

Photograph of two toothbrushes in a white cup with toothpaste

All-purpose toothpaste isn’t targeted to one particular market segment.

For certain types of widely consumed items (e.g., gasoline, soft drinks, white bread), the undifferentiated market approach makes the most sense. For example, toothpaste (such as the brands Crest and Colgate) isn’t made specially for one consumer segment, and it is sold in huge quantities. The manufacturer’s goal is to get more people to select and buy their particular brand over another when they come to the point of purchase. Walk through any supermarket, and you will observe hundreds of grocery products, especially generic items, that are perceived as nearly identical by the consumer and are treated as such by the producer. Many mass-marketed items are considered staple or “commodity” items. People buy new ones when the old ones wear out or are used up, and mass-marketed brand loyalty might be the primary driver when they decide which replacement product to purchase.

Differentiated Marketing

A differentiated marketing strategy is one in which the company decides to provide separate offerings to each different market segment that it targets. It is also called multisegment marketing. Each segment is targeted in a particular way, as the company provides unique benefits to different segments. The goal is to help the company increase sales and market share across each segment it targets. Proctor and Gamble, for example, segments some of its markets by gender, and it has separate product offerings and marketing plans for each: Secret-brand deodorant for women, and Rogaine (a treatment for hair loss) for men.^[1]

When it is successful, differentiated marketing can create a very strong, entrenched market presence that is difficult for competitors to displace because of consumers’ strong affinity for products and offers that meet the unique needs of their segment. A differentiated strategy can be a smart approach for new companies that enter a market and lure customers away from established players to capture share in a large overall market. Often, established companies become vulnerable to new competitors because they don’t give sufficient attention to the perfect marketing mix for any given market segment.

However, differentiated marketing is also very expensive. It carries higher costs for the company because it requires the development of unique products to fit each target segment. Likewise, each unique product and market segment requires its own marketing plans and execution: unique messages, campaigns, and promotional tactics and investments. Costs can add up quickly, especially if you are targeting a lot of unique market segments.

CHINESE OREOS

For a large company such as Kraft, the cost of this kind of marketing is well worth it, since its products are sold all over the world. An example of its differentiated marketing strategy are the many surprising variations of the famous Oreo cookie developed for the Chinese market. Consumers there can enjoy Oreos with cream flavors such as green-tea ice cream, raspberry-blueberry, mango-orange, and grape-peach. All of these Oreo formulations have been heavily market tested and are based on the unique preferences of Chinese consumers. ^[2]

Niche Marketing

Niche marketing (also called concentrated marketing) is a strategy that targets only one or a few very defined and specific segments of the consumer population. The goal is to achieve high penetration among the narrowly defined target segments. For example, the manufacturer of Rolex watches has chosen to concentrate on only the luxury segment of the watch market.

An organization that adopts a niche strategy gains an advantage by focusing all efforts on only one or a small handful of segments. All of their market analysis, product development, marketing strategy, and tactics concentrate on serving that select part of the market. When they do it well, this approach can provide a differential advantage over other organizations that don’t concentrate all their efforts on the “niche” segment(s). Niche targeting is particularly effective for small companies with limited resources, as it does not require the use of mass production, mass distribution, or mass advertising. When a company is highly successful in desirable “niche” market segments, it can be very profitable.

Photo of two female mannequins wearing black dresses in a Ralph Lauren display window.

Ralph Lauren store, London

The primary disadvantage of niche marketing is that it makes companies vulnerable to demand in the narrow market segments they serve. As long as demand is robust, the organization’s financial position will be strong. But if something changes and demand drops off, the company has nothing to cushion it from financial hardship. Since the company has focused all efforts on one market (essentially putting all their eggs in one basket), the firm is always somewhat at risk. Such companies are especially vulnerable to small shifts in population or consumer tastes, which can greatly affect their position (for better or for worse). Large competitors with deeper pockets may choose to enter a market and use their size and resources to put smaller, niche players out of business. To insulate themselves from this type of risk, many companies pursing a niche strategy may target multiple segments.

Luxury-goods providers are a great illustration of the challenges of the niche marketing strategy. When economic recessions occur, luxury-goods providers like Rolex, Chanel, and Armani routinely struggle financially because their narrow segment of “luxury” consumers has less disposable income. When fickle consumer tastes shift from Ralph Lauren to Dolce & Gabanna to Prada (and back again), the company’s profitability can hang in the balance.

Micromarketing

Micromarketing is a targeting strategy that focuses even more narrowly than niche marketing. It caters to the needs of individuals (“individual marketing”) or very small segments in a targeted geography (“local marketing”). Micromarketing can be very powerful by giving consumers exactly what they want, when they want it. However, to achieve large-scale success with this approach, companies must figure out how to meet highly individualized needs efficiently and profitably.

Individual marketing is sometimes referred to as “mass customization” or “one-to-one marketing.” With this approach, companies offer consumers a product created to their individual specifications. For example, Build-A-Bear Workshop invites children to create their own custom stuffed animals. A child can select the type of animal, from teddy bear to unicorn, along with color, size, clothing, and other accessories. Creators of handmade goods on Etsy.com take orders from buyers who may request variations on the individually crafted jewelry, clothing, toys, and other items displayed on the Web site. In the following video, Etsty CEO, Chad Dickerson, explains what makes the company’s approach unique.

Read a transcript of the video “Etsy Business.”

Achieving wide-scale success with individual marketing requires product providers to develop production strategies and an entire marketing mix that can ramp up as demand grows. Frequently this involves offering a baseline product with parameters customers can customize to fit their needs. For example, you can order custom M&M candies, selecting colors, packaging, and even custom-printed with words or images you select. The advent of digital print technologies has also made mass customization a viable targeting strategy for companies like Vistaprint and Sticker Mule. They provide custom print materials, stickers, decals and other printed products for businesses and individuals using designs created and uploaded by customers. Their primary messaging emphasizes custom products designed by and for individual customers, matching their unique needs and preferences.

Local marketing is a targeting strategy focused expressly on a small, clearly defined neighborhood or geographic area. Organizations using this technique strive to generate a strong local presence, and targets may include any person or organization within that small area.

Photo of the fruits and vegetables in a CSA box from a farm in California. Pictured are French radishes, cucumbers, yellow Swiss chard, red peppers, yellow squash, tomatoes, cilantro, eggplants, and almonds

A weekly produce share from Suzie’s Farm, a CSA in California

Groupon and Amazon Local are excellent examples of local marketing. Both online services partner with local businesses to promote timely offers and special pricing for individuals living in a designated geographic area. Limited-time and limited-quantity deals may include restaurant meals, spa treatments, performances, recreational activities, lessons, hotel accommodations, and a wide variety of other local area products and services. These local marketing companies earn revenue when consumers purchase and redeem the special offers in their neighborhood or city. Another example are farm cooperatives and CSAs (community-supported agriculture shares), which virtually always use a local marketing strategy. They market locally grown produce and farm-fresh goods to people residing in the immediate community, and their ongoing goal is to increase local supply and demand for healthy, local, farm-fresh food and produce.

Applying the Marketing Mix to Target Segments

With any of the strategies described above, the marketing team must come together to develop a marketing mix tailored to the needs of each segment being targeted. This marketing mix is the unique combination of product, promotion, place, and price designed expressly to fit a designated market segment. The Marketing Mix 1. Target Market is surrounded by the four Ps: Product, Price Promotion, and Place.

SHAPING THE MARKETING MIX

This course will explore each element of the marketing mix in further detail in other modules. However, the following questions can help you start down the path toward shaping the marketing mix to fit your target segments.

Product

What would make the ideal product for your target segment?
What special features or capabilities are critical for this segment?
What unique problems does your product help this segment solve?

Promotion

What are the best ways to get your target segment’s attention?
What do you want this segment to remember about your product?

Place / Distribution

Where does this segment look or shop for your product?
What is the best way to get your product to your target customers?

Price

What price(s) are your target customers willing to pay for your product?
How much is too expensive? How much is too cheap?

As you consider each of these questions, you generate ideas for altering the marketing mix to appeal to your target segment.

EXAMPLE: ALUMNI CHARITABLE GIVING

Photo of a large group of people posing at a college school reunion

Let’s see how this works in practice. A university alumni organization embarks on a fund-raising campaign to generate funding for the strategic expansion of new and existing university programs. The baseline “product” this organization sells is charitable giving: an affiliation with the university, a tax deductible charitable donation, and the honor of contributing to a worthy philanthropic cause.

For the coming year, the alumni organization decides to use a niche marketing strategy. Specifically, it will target alumni with significant upcoming reunions or years since graduation: 5 years, 10 years, 15 years, 20 years, 25 years, 30 years, and so forth. The organization chooses to tailor the marketing mix as follows:

Product: The ideal product for these alumni isn’t just a generic philanthropic donation. Instead, it is a giving opportunity that reflects their significant anniversary. For this reason, the alumni organization introduces a new “product” or type of donation opportunity: a class legacy fund that encourages alumni to contribute with other classmates to a common fund. When they do, they can select the areas they want their donation to benefit, such as scholarships, library, technology, and endowed professorship, etc.
Promotion: Getting the attention of busy alumni scattered across the world is a challenge. People are most likely to pay attention when a message is coming from someone they know personally, and so the alumni organization decides to capitalize on classmate relationships. It recruits several well-connected people from each class to post on social media and send email messages to fellow classmates about an upcoming reunion as well as the legacy-fund donation opportunity. The email message asks people to share with other former classmates who may not have heard about the reunion and class legacy fund. Hopefully, this message begins to go viral, working through pre-existing networks to spread the word. The organization also sends a letter about the class legacy fund to older alumni who are less likely to be active with email or digital technology.
Place/Distribution: As people learn about the class legacy fund, the alumni organization wants to make sure the donation opportunity is easy for anyone to act on. For this reason, they offer a variety of different ways to contribute: mail a check; dial a phone number; donate on a Web site using PayPal or a credit card; donate via phone using a mobile app. People can even come to the annual reunion activities and contribute to the legacy fund in person.
Price: For a voluntary donation, “price” can be tricky. On one hand, the alumni organization wants to encourage donations of any size to the class legacy funds, no matter how small. On the other hand, it also wants to encourage alumni to consider making larger donations when possible. Based on publicly available income data, the alumni organization recognizes that most recent graduates have lower average salaries and disposable income compared to those who have been working their fields for a decade or more. Acting on this information, it adjusts the range of “suggested donation” levels for each class. Recent alumni marking a 5-year anniversary are invited to contribute between $25 and $250. Alumni marking 10- and 15-year anniversaries are invited to contribute between $50 and $500 to class legacy funds. Alumni with 20 or more years see suggested donation amounts ranging from $150 to $2,500 or more.

Thoughtful consideration of the four Ps leads to a successful launch of the alumni organization’s class legacy funds. Because the alumni organization has tailored the product, promotional strategy, placement, and pricing to the interests of the target segments, the effort is much more successful than the all-purpose, generic, “please donate to your alumni organization” campaign used in the past. In this example, wise targeting strategy works hand-in-hand with the marketing mix to yield better results.

Markgraf, Bert. “Real-World Examples of Effective Market Segmentation.” Small Business – Chron.com. Chron.com, November 21, 2017. http://smallbusiness.chron.com/realworld-examples-effective-market-segmentation-60195.html. ↵
Eric Jou,Jou, Eric. “The Wonderfully Weird World Of Chinese Oreos.” Kotaku. Kotaku, October 1, 2012. http://kotaku.com/5947767/the-wonderfully-weird-world-of-chinese-oreos. ↵

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Unit C.13 – Case Study: Red Bull Wins the “Extreme” Niche

February 17, 2020February 17, 2020 by christopher

Background

Photo of a can of Red Bull "energy drink." Red Bull is an Austria-based company started in 1987 by Dietrich Mateschitz that sells one product: an energy drink containing taurine (an amino acid) that’s sold in a slim, silver-colored 8.3-ounce can. The drink has been an enormous hit with the company’s target youth segment around the globe. In the year 2018, Red Bull boasted sales of $1.06 billion USD in the United States alone^[1], and has held the majority of the energy-drink market share for years, with a 35.3% market share in 2019 (Monster Energy, their closest competitor, held 25.4%).^[2] From Stanford University in California to the beaches of Australia and Thailand, Red Bull has managed to maintain its hip, cool image, with virtually no mass-market advertising.

Red Bull’s Targeted Approach to Marketing

“Red Bull. It gives you wings.” Over the years, Red Bull has organized extreme sports events (like cliff diving in Hawaii and skateboarding in San Francisco), parties, and even music festivals to reinforce the brand’s extreme, on-the-edge image. In 2012, they sponsored Felix Baumgartner’s record-setting freefall from 128,000 feet:

Their grass-roots approach to reaching the youth market worked: “In terms of attracting new customers and enhancing consumer loyalty, Red Bull has a more effective branding campaign than Coke or Pepsi,” said Nancy F. Koehn, author of Brand New: How Entrepreneurs Earned Consumers’ Trust from Wedgwood to Dell. Red Bull’s success has also gained attention (and concern) among beverage-industry giants, and some have tried to follow its lead: For a time Coke ran a stealth marketing campaign, packaging its cola in a slim can reminiscent of Red Bull and offering it to customers in trendy bars and clubs in New York City.

“Red Bull Energy Drink Sales U.S., 2015–2018.” Statista. Accessed September 25, 2019. https://www.statista.com/statistics/558082/us-sales-of-red-bull-energy-drinks/. ↵
“Energy Drink Market Share in the US in 2019.” Statista. Accessed September 25, 2019. https://www.statista.com/statistics/306864/market-share-of-leading-energy-drink-brands-in-the-us-based-on-case-volume-sales/. ↵

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Unit B.23 – Discussion: Analyzing Marketing Efforts

February 17, 2020February 17, 2020 by christopher

Step 1: Choose an Organization

Choose an organization that does marketing. Use the guidelines below as you make your selection. Make it easy on yourself and choose an organization you’re interested in, and for which you can observe the marketing efforts.

If you choose a very large organization that markets many different products, focus your paper on one product or product line. For example, if you choose Chevrolet, don’t address trucks but choose a particular model of truck, or Corvettes.

Step 2: Explore the Organization’s Current Marketing Activity

Take a few minutes to research where and how this organization is conducting marketing activities. What marketing tactics and channels is it using? Who is it reaching?

Step 3: Post to the Discussion

Put the following information into your post:

Company name
Headquarter location (city, state/province, country)
Industry
Web site
Why you chose this organization
What marketing efforts you can see the organization doing

Step 4: Respond to Classmates’ Posts

After you have created your own post, look over the discussion posts of your classmates and respond to at least two of them.

Guidelines for Selecting an Organization

Identify an organization working in industry or area that interests you. Choose carefully because during this course, you will create a marketing plan focused on this organization. Think broadly about the type of organization you’d like to focus on. If you choose a very large organization, you’ll need to pick a specific product or service to explore. Small and medium-sized businesses tend to work well.

You’ll need an organization for which plenty of content is available to help you with the analysis you’re trying to do. You may be able to find primary information, or you may need to do research and create informed hypotheses (guesses) based on your research.

The following table lists a number of industries and sample companies you might consider. After this discussion post, you’ll have one week to change your selection if you decide to take a different path for the marketing plan.

Industry	Organization Examples
Healthcare	United Healthcare, Kaiser
Entertainment	Dave & Buster’s, Regal Cinemas
Banking & Financial Services	Simple, Charles Schwab
Sporting Goods	Nike, REI, Bass Pro
Clothing, Shoes, Accessories	Guess, Tom’s Shoes
Dining, Food Service	Jimmy John’s, Five Guys, Sysco, Kellogg
Hospitality	Marriott, Kimpton, Comfort Suites
Retail	Zappos, Macy’s, Dollar Tree, Trader Joe’s
Packaged Goods	Hershey, Hain Celestial
Technology	SpaceX, Snapchat
Manufacturing	Boeing, John Deere
Transportation	Virgin Atlantic, Carnival Cruise Lines, Uber
Automotive	Tesla, AutoNation
Business & Consulting Services	VistaPrint, H&R Block, Jackson Hewitt
Non-profit or Charitable Organization	Museum of Modern Art, The Trevor Project, Kiva, Wounded Warrior Project

Grading Rubric for Discussion Posts

The following grading rubric may be used consistently for evaluating all discussion posts.

Discussion Grading Rubric

Criteria	Response Quality: Not Evident	Response Quality: Developing	Response Quality: Exemplary	Point Value Possible
Submit your initial response	No post made – 0 pts	Post is either late or off-topic – 2 pts	Post is made on time and is focused on the prompt – 5 pts	Point value possible – 5 pts
Respond to at least two peers’ presentations	No response to peers – 0 pts	Responded to only one peer – 2 pts	Responded to two peers – 5 pts	Point value possible –5 pts

Total Points Possible for Discussion Assignment: 10pts.

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Revision and adaptation. Provided by: Lumen Learning. License: CC BY: Attribution
Sample Discussion Grading Matrix. Provided by: Lumen Learning. License: CC BY: Attribution

Discussion: Analyzing Marketing Efforts. Authored by: Larry Chase. Provided by: Tompkins Cortland Community College. Project: Kaleidoscope . License: CC BY: Attribution

Unit B.25 – Assignment: Submit Marketing Plan Template

February 26, 2020February 17, 2020 by christopher

During this course, you will learn to develop all the essential elements of a Marketing Plan. The purpose of this assignment is to make sure you are familiar with this course’s Marketing Plan Template. It is a well-designed tool for learning and reference about what a Marketing Plan includes and how to create one.

Student Instructions:

Download the Marketing Plan Template: Open it in MS Word or Google Docs, your choice.
Take a moment to look over the Marketing Plan Template and notice the different pieces of information it includes.
Add your name to the header or another easily identifiable location in the Marketing Plan Template.
Save the template with a new name using this convention: first initial.last name_MKT Plan_v1.
1. Example: J.Workman_MKT Plan_v1.doc
Submit this document as an assignment.

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Unit B.13 – Using the Marketing Mix

February 26, 2020February 17, 2020 by christopher

Using the Marketing Mix

What you’ll learn to do: explain how organizations use the marketing mix to market to their target customers

Now that we know what tools are available to create value, how can we use them most effectively? In this section we’ll cover a number of examples; later in the course we’ll discuss the role of the marketing mix in the planning process and in a range of specific applications.

As you begin to understand each of the individual components of the marketing mix, remember that none of the four Ps operates independently to create value for the customer. For instance, a higher price will create higher expectations for the quality of the product or service, and may demand a higher level of customer service in the distribution process. Heavy promotion of a product can create greater awareness of the value that is expected, increasing the importance of the product delivering value. The right mix of components supporting the value proposition becomes very important.

Photo of row of salon shelves full of hair-care products.

How does an organization determine the right marketing mix? The answer depends on the organization’s goals. Think of the marketing mix as a recipe that can be adjusted—through small adjustments or dramatic changes—to support broader company goals.

Decisions about the marketing-mix variables are interrelated. Each of the marketing mix variables must be coordinated with the other elements of the marketing program.

Consider, for a moment, the simple selection of hair shampoo. Let’s think about three different brands of shampoo and call them Discount, Upscale, and Premium. The table below shows some of the elements of the marketing mix that impact decisions by target customers.

	Discount	Upscale	Premium
Product	Cleansing product, pleasant smell, low-cost packaging	Cleansing product, pleasant smell, attractive packaging	Cleansing product, pleasant smell created by named ingredients, premium packaging
Promotion	Few, if any, broad communications	National commercials show famous female “customers” with clean, bouncy hair	Differentiating features and ingredients highlighted (e.g., safe for colored hair), as well as an emphasis on the science behind the formula. Recommended by stylist in the salon.
Place	Distributed in grocery stores and drugstores	Distributed in grocery stores and drugstores	Distributed only in licensed salons
Price	Lowest price on the shelf	Highest price in the grocery store (8 times the prices of discount)	3 to 5 times the price of Upscale

A number of credible studies suggest that there is no difference in the effectiveness of Premium or Upscale shampoo compared with Discount shampoo, but the communication, distribution, and price are substantially different. Each product appeals to a very different target market. Do you buy your shampoo in a grocery store or a salon? Your answer is likely based on the marketing mix that has most influenced you.

An effective marketing mix centers on a target customer. Each element of the mix is evaluated and adjusted to provide unique value to the target customer. In our shampoo example, if the target market is affluent women who pay for expensive salon services, then reducing the price of a premium product might actually hurt sales, particularly if it leads stylists in salons to question the quality of the ingredients. Similarly, making the packaging more appealing for a discount product could have a negative impact if it increases the price even slightly or if it causes shoppers to visually confuse it with a more expensive product.

The goal with the marketing mix is to align marketing activities with the needs of the target customer.

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Finding the Right Mix. Provided by: Lumen Learning. License: CC BY: Attribution
Outcome: Using the Marketing Mix. Provided by: Lumen Learning. License: CC BY: Attribution

Introducing Marketing. Authored by: John Burnett. Project: Global Textbook Project. License: CC BY: Attribution
Vast Array of Hair Care Products. Authored by: Sea Turtle.License: CC BY-NC-ND: Attribution-NonCommercial-NoDerivatives

Unit B.11 – Marketing Mix

February 26, 2020February 17, 2020 by christopher

What you’ll be able to do: describe the marketing mix

The value proposition explains why a consumer should buy a product or use a service and how the product or service will add more value, or better solve a problem, than other similar offerings. Once you get the value proposition right, you still have to actually deliver value to your target customer. The marketing mix describes the tools that marketers use to create value for customers.

Reaching Customers through the Marketing Mix

The value proposition is a simple, powerful statement of value, but it is only the tip of the iceberg. How do marketing professionals ensure that they are reaching and delivering value to the target customer?

Take yourself, as a “target customer.” Think about your cell phone. What would make you want to buy a new one? How might the following issues affect your purchasing decision? Factors that might influence your decision include the following:

Features: A company has just released a new phone with amazing features that appeal to you.
Price: You’re concerned about the price—is this phone a good deal? Too expensive? So cheap that you suspect there’s a “catch”?
Information: How did you find out about this phone? Did you see an ad? Hear about it from a friend? See pictures and comments about it online?
Customer service: Is your cell service provider making it easier for you to buy this phone with a new plan or an upgrade?
Convenience: Could you easily buy it online in a moment of indulgence?

You can see there are multiple factors that might influence your thinking and decision about what to buy—a mix of factors. Taken together, these factors are all part of the “marketing mix.”

Organizations must find the right combination of factors that allow them to gain an advantage over their competitors. This combination—the marketing mix—is the combination of factors that a company controls to provide value to its target customers.

The following video illustrates how the marketing mix changes depending on the target customer:

Evolving Definitions of the Marketing Mix

There are a few different ways the marketing mix is presented. During the 1950s the components of the marketing mix were conceived as the “four Ps” and were defined as follows:

Product: the goods and services offered
Promotion: communication and information
Place: distribution or delivery
Price: ensuring fair value in the transaction^[1]

Today, this categorization continues to be useful in understanding the basic activities associated with marketing. The marketing mix represents the way an organization’s broad marketing strategies are translated into marketing programs for action.

Over time, new categories of the marketing mix have been proposed. Most are more consumer oriented and attempt to better fit the movement toward a marketing orientation and a greater emphasis on customer value. One example is the four Cs, proposed by Robert F Lauterborn in 1990:

Customer solution: what the customer wants and needs
Communication: a two-way dialogue with the customer
Convenience: an easy process to act or buy
Cost: the customer’s cost to satisfy that want or need^[2]

The four Cs include a greater focus on the customer but align nicely with the older four Ps. They also enable one to think about the marketing mix for services, not just products. While it is difficult to think about hotel accommodations as a distinct product, it is much easier to think about a hotel creating a customer solution. You can see how the four Ps compare with the four Cs in the chart below.

The Four Ps Alignment with the Four Cs

Four Ps	Four Cs	Definition
Product	Consumer solution	A company will only sell what the consumer specifically wants to buy. So, marketers should study consumer wants and needs in order to attract them one by one with something he/she wants to purchase.
Price	Cost	Price is only a part of the total cost to satisfy a want or a need. For example, the total cost might be the cost of time in acquiring a good or a service, along with the cost of conscience in consuming it. It reflects the total cost of ownership. Many factors affect cost, including but not limited to the customer’s cost to change or implement the new product or service and the customer’s cost for not selecting a competitor’s product or service.
Promotion	Communication	Communications can include advertising, public relations, personal selling, viral advertising, and any form of communication between the organization and the consumer.
Place	Convenience	In the era of Internet, catalogs, credit cards, and smartphones, often people don’t have to go to a particular place to satisfy a want or a need, nor are they limited to a few places to satisfy them. Marketers should know how the target market prefers to buy, how to be there and be ubiquitous, in order to provide convenience of buying. With the rise of Internet and hybrid models of purchasing, “place” is becoming less relevant. Convenience takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors.

Whether we reference the four Ps or the four Cs, it is important to recognize that marketing requires attention to a range of different approaches and variables that influence customer behavior. Getting the right mix of activities is essential for marketing success.

Competitors and the Marketing Mix

The challenge of getting the right marketing mix is magnified by the existence of competitors, who exert market pressures using strategies defined by their marketing mix alternatives. Remember, the purpose of the marketing mix is to find the right combination of product, price, promotion, and distribution (place) so that a company can gain and maintain advantage over competitors.

Product

Purple hexagon with the following text in the center: Product: What solution does the customer want and need? Outside the hexagon, to the right, is a bulleted list of considerations: features, design, user experience, naming, branding, differentiation In the marketing mix, the term “product” means the solution that the customer wants and needs. In this context, we focus on the solution rather than only on the physical product. Examples of the product include:

The Tesla Model S, a premium electric car
A Stay at a Holiday Inn Express, a low-price national hotel chain
Doritos Nachos Cheese, a snack food
Simple, an online banking service

Each of these products has a unique set of features, design, name, and brand that are focused on a target customer. The characteristics of the products are different from competitors’ products.

Source: https://www.simple.com/banking

Promotion

Green hexagon with the following text in the center: Promotion: What is the dialogue between customer and company? Outside the hexagon, to the right, is a bulleted list of considerations: Message, method of delivering message, timing of delivery, communications by customers and influencers, competitor promotions. In the marketing mix, the term “promotion” refers to the communications that occur between the company and the customer. Promotion includes both the messages sent by the company and messages that customers send to the public about their experience. Examples of promotion include:

An advertisement in Cooking Light magazine
A customer’s review of the product on Tumblr
A newspaper article in the local paper quoting a company employee as an expert
A test message sent to a list of customers or prospects

Marketing professionals have an increasingly difficult job influencing promotions that cannot be controlled by the company. The company’s formal messages and advertising are only one part of promotions.

facebook logo plus their slogan: "Like us on facebook."

Marketers often run social media campaigns, rewarding customers who “Like” the company on Facebook.

Place

In the marketing mix, the term “place” refers to the distribution of the product. Where does the customer buy the product? “Place” might be a traditional brick-and-mortar store, or it could be online. Examples include:

Distribution through an online retailer such as Amazon.com
Use of a direct sales force that sells directly to buyers
Sales through the company’s Web site, such as the shoe purchases at Nike.com
Sales by a distributor or partner, such as the purchase of a Samsung phone from Best Buy or from a Verizon store

In today’s world, the concept of “place” in the marketing mix rarely refers to a specific physical address. It takes into account the broad range of distribution channels that make it easy for the target customer to buy.

STARBUCKS ONLINE ORDERING

How did a company like Starbucks that sells hot drinks from a storefront use mobile technology to improve distribution? Watch the video, below, to find out:

Price

In the marketing mix, the term “price” refers to the cost to the customer. This requires the company to analyze the product’s value for the target customer. Examples of price include:

The price of a used college textbook in the campus bookstore
Promotional pricing such as Sonic Drive-In’s half-price cheeseburgers on Tuesdays
Discounts to trade customers, such as furniture discounts for interior designers

Marketing professionals must analyze what buyers are willing to pay, what competitors are charging, and what the price means to the target customer when calculating the product’s value. Determining price is almost always a complicated analysis that brings together many variables.

Sonic offers discounts on cheeseburgers on Tuesday, which is typically a low sales day of the week. Source: https://www.sonicdrivein.com

McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin. ↵
Lauterborn, B. (1990). New Marketing Litany: Four Ps Passé: C-Words Take Over. Advertising Age, 61(41), 26. ↵