Another successful campaign took place in 2000, when Food.com approached HFM with the concept of partnering with Second Harvest (a national food bank) to sponsor a national food drive on college campuses, using the incentive of awarding the campus that collected the most food at a big concert. HFM had to go back to the company and say that "you can put a carrot on the end of a stick, but the stick can't be too lang." In other words, Food.com needed a more tangible campaign, something with instant feedback to "show (the students) that it's real, that it's there." Vos and his creative marketing team came up with a compilation CD entitled "Music 4 Food," whiCh was distributed free of charge to students who donated food (they also received a ticket to a nearby concert).
Sources: Debra Goldman. "S&Sr Markets the Tried and True to Teen Boys: Misogyny," Adweek, May 15, 2000, p. 24; Jinnefer Gilbert, "New Teen Obsession," Advertising Age, February 14, 2000, p. 38; Chrtstina Merrill, "The Ripple Effect Reaches Gen Y." American Demographics, November 1999, pp. 15-16; Lauren Goldstein, "The Alpha Teenager," Fortune, December 20, 1999, pp. 201-203.
APPROACHING THE MARKET
47
The Concept of Positioning
Both product diffefentiation and market segmentation result in a perceived position for the company or organization. From the intelligent marketing organization, there should be an attempt to create the desired position, rather than wait for it to be created by customers, the public, or even competitors. Positioning is defined as the act of designing the company's offering and image to occupy a distinctive place in the target market's mind. The end result of positioning is the successful creation of a market-focused value proposition, a cogent reason why the target market should buy the product.
Since positioning is a strategy that starts with the product, we expand our discussion of positioning in the Product Chapter.
The Future of the Marketplace
As the spread of the global marketplace continues, aided by satellites, the World Wide Web, and univeral problems, it will also become increasingly difficult to effectively assess the market. In fact, there is solid evidence that the market will often consist of a single person or company. Customized product design, relationship marketing, and one-on-one marketing suggests that mark.eting has gone full circle. Like the first half of the twentieth century, when the comer grocer knew all of his customers personally, marketing in the rest of the twenty-first century may look very similar.
Bases of segmentation
a. Ultimate Consumers
1. Geographic
2. Demographics
3. Usage
4. Psychological
b. Organizations
1. Type of customer
2. End uses
3. Common buying factors
4. Size and geography
c. Single-base versus multi-base
d. Qualify people into segments
1. Clarity of identification
2. Actual or potential need
3. Effective demand
4. Economic accessibility
5. Positive response
e. Segmentation process
THE WALL STREET JOURNAL.
IN PRACTICE
What is the market? It depends on your product but, generally, all markets possess similar, basic characteristics. The market is people, either individuals or groups, businesses or institutions. The market is also a place, as in marketplace, where transactions take place. Finally, the market is an economic entity, influenced by financial pressures and government regulations.
In order to sell a product, marketers must know their market and know it well. Four primary markets exist, but they are not mutually exclusive. Consumer, industrial, institutional, and reseller markets all have characteristics specific to their consumers, but they also overlap in many instances. As a resull, most successful companies segment their markets. By segmenting markets, a company can match the needs and wants of consumers to its product.
Print magazines and their online counterparts are excellent examples of market segmenting. The Interactive lournal targets the business community, while Outside Magazine (www.outsidemag.com). clearly targets outdoor enthusiasts.
You are able to customize the Interactive lournal to your personal preferences. On the Front Section, click on Personal Journal on the main menu. From here you will be directed to the Setup Center. Here, you can create folders in three separate areas:
1. News
2. Favorites
3. Portfolio
In the News section, you can search for news items in the Interactive
lournal using key words, company names, and industry type. Articles meeting the criteria you specify will be listed automatically on a daily basis. Set up your own News folder now.
In the Favorites section, you can track regularly running columns and features in the major sections such as Marketplace and Tech Center. Create your own Favorites folder now.
In the Portfolio section, you can track your purchases and sales of specific stocks.
DELIVERABLE
Identify three to Lve companies with segmented markets. Visit their websites for specific information about the companies and their products. Also search the Interactive lournal for more in'ormation about the companies you have identified. For each company, identify the segmented market and list specific characteristics about that market.
DISCUSSION QUESTIONS
1. What are the advantages of identifying and selling to segmented markets versus broader, general markets?
2. How do companies identify the market most likely to buy their products?
3. Describe why market segmenting helps the companies yOll identified in your Deliverable sell their products.
4. How can you use the Tnterac-tive JO'lrnal to learn more about markets?
MARKETER'S VOCABULARY 49
SUMMARY
The concept of a market was examined in this chapter. It was defined from three perspectives: people, place, and economic activity. In addition, the four types of markets were discussed. The bulk of this chapter dealt with the two general marketing approaches toward the market: undifferentiated (aggregated) and segmental. The former was defined as the assumption that the market is homogeneous and developing separate strategies is unnecessary. The latter was defined as the acknowledgement that markets contain sub markets known as segments, which must be evaluated as potential target markets. The remainder of the chapter highlighted various bases for segmenting markets and delineating the criteria employed in assessing the value of a segment.
MARKETER'S VOCABULARY
Market aggregation (undifferentiated marketing) Treating an entire market uniformly, making little or no attempt to differentiate marketing effort.
Product differentiation A marketing strategy that emphasizes distinctive product features without recognizing diversity of consumer needs.
Market segmentation Dividing a total market into several submarkets or segments, each of which is homogeneous in all significant aspects, for the purpose of selecting one or more target markets on which to concentrate marketing effort.
Concentration strategy Used by an organization that chooses to focus its marketing efforts on only one market segment.
Multisegment strategy Used by an organization that chooses to focus its marketing effort on two or more distinct segments.
Ultimate user An individual or organization that buys and/or uses products or services for their own personal consumption.
Industrial user An organization that buys products or services for use in their own businesses, or to make other products.
Demographic characteristics Statistical characteristics of a population often used to segment markets, such as age, sex, family lifecycle, income, or education.
Usage rate A segmentation base that identifies customers on the basis of the frequency of use of a product.
Purchase occasion A segmentation base that identifies when they use the product.
User status A segmentation base that identifies customers on the basis of patterns of use, such as one-time or regular use.
Loyalty A segmentation base that identifies customers on the basis of purchase patterns of particular brands.
Stage of readiness A segmentation base that identifies customers on the basis of how ready a customer is to buy.
Psychological segmentation The use of attitudes, personality, motives, and lifestyle to identify customers.
Attitude A predisposition to behave in a certain way to a given stimuli.
Personality All the traits of a person that make himlher unique.
50 CHAPTER 2 UNDERSTANDING AND APPROACHING THE MARKET
Motive A reason for behavior.
Lifestyle A pattern of attitudes, interests, and opinions held by a person.
Organizational markets A market consisting of those organizations who buy products or services for their businesses, for use in making other products, or for resale.
Standard industrial classification (SIC) A U.S. government publication that classifies business firms by the main product or service provided.
Single-base segmentation strategy The use of a single base to segment markets.
Multi-base segmentation strategy The use of two or more bases to segment markets.
Clarity of identification The degree to which one can identify those inside and those outside the market segment.
Actual need Overt demand for existing goods or services.
Potential need A need that can be changed into perceived wants through such means as education or persuasion.
Effective demand Actual or potential needs existing along with purchasing power (income, savings, and credit) belonging to members of a market segment.
Economic accessibility Members of a market segment must be reachable and profitable.
DISCUSSION QUESTIONS
1. What makes the concept of market segmentation different from that of product differentiation?
2. What are the advantages that market segmentation has over aggregate or mass marketing?
3. What criteria would you use to determine whether the toothpaste market should be grouped into a "drinker's toothpaste" segment? A "business person's toothpaste" segment?
4. Why is demographic segmentation alone not always a sufficient means of target market identification? Suggest a better method.
5. Assume that you have been hired by a film to segment the market for replacement tires. What segmentation bases would you use? What pitfalls should you be suspicious of?
6. List the steps in the market segmentation process.
7. Describe the means by which industrial reseller markets can be segmented.
8. Segmentation is really an aggregation process. Explain.
9. Is a multi-base segmentation approach always better than the use of a single segmentation base?
10. Do you think that there are distinct market segments for personal computers? If so, what are the characteristics? If not, why not?
CASE APPLICATION 51
PROJECT
Go through a cross-section of consumer and business magazines. Clip out ads that you feel represent at least five bases for segmentation. Select one and apply the criteria of a valid segment. Write a two-page report.
CASE APPLICATION
ROLLING ROCK FINDS ITS NICHE
On the back of each long-neck bottle of Rolling Rock beer, a bold but simple "33" stands out. Plain white on the dark green glass, the number sits enclosed in quotation marks, squarely below a block of type, daring the drinker to discover its meaning.
Since] 939, when the brew from Latrobe, Pennsylvania, made its debut, that "33" has been captwing the imagination of consumers. Fans of the beer steadily wrote Latrobe Brewing Co., trying to discern the significance of the number. Theories abound, but if anybody knows the real story, they haven't told-which only adds to the "33" mystique.
This natural marketing hook, however, remained untapped for most of the beer's history. The company rarely ran promotions and its advertising did little to bolster the "33" myth. Rolling Rock was just another beer saddled with a blue-collar image, and in the white-collar 1980s sales began to decline steadily.
Things began to change for Rolling Rock in mid-1987, when Labatt's USA acquired Latrobe Brewing. The new owner, who recognized a good thing, brought in a Dallas-based promotions agency, The Marketing Continuum, and ad agency, Hill, Holliday, Connors, Cosmopulous, to take advantage of the "33" legend.
The agencies believed that by playing up the number, they could preserve the brand's unique personality. They also sought to reposition Rolling Rock as a super-premium brand and saw "33" as the vital link to its long history, distinctive packaging, and special aura.
How successful has the new strategy been? Sales during the first two months climbed fifteen percent from the same peliod a year earlier. The repositioning has also paid off nicely. The brand's primary audience is no longer college students and blue-collar workers. The demographic on today's average Rolling Rock consumer shows a 21 to 35-year-old white-collar male earning $40,000 or more per year.
David Mullen, executive at TMC, says it was clear early in his company's relationship with Rolling Rock that the kind of "me too" bikini advertising, which has homogenized so many of the major beers, would be a poor direction for this brand. That's because Rolling Rock was a niche brand trying to capture the attention of consumers and distributors in a saturated market. The marketing minds behind Rolling Rock, Mullen says, saw a window of opportunity in the super-premium segment, where brands like Michelob and Lowenbrau were losing their allure with consumers who wanted something unique. So Mullen and his cohorts devised a successful program that continues to stress the "specialness" of the brand. Source: Kathy Thacker. "Solutions: Winning Number," Adweek (October 28, 1999): pp. 40—41.
Questions:
1. Despite the apparent success of this new marketing strategy designed by TMC, there are potential problems with the segmentation approach employed. Discuss these problems.
52 CHAPTER 2 UNDERSTANDING AND APPROACHING THE MARKET
REFERENCES
1. Alvin A. Achenbaulll, "Advertising Doesn't Manipulate Consumerism," Journal ofAdvenising Research, April 1972, p. 7.
2. B. Charles Ames and James D. Hlavacek, Managing Marketing for Industrial Firms, New York, N.Y.: Random House, pp. 96- 103.
3. Ames, p. 102.
4. Betsy D. Belb, "Discovering the 65+ Consumer," Business Horizons, May-June 1982, pp. 42-46.
5. Alfred S. Boote, "Market Segmentation by Personal Values and Salient Product Attributes," Journal of Advertising Research, Vol. 21, No. I, February 198 I, pp. 29-35.
6. Kenneth Boulding, Economic Analysis, New York, N.Y.: Harper & Row, Inc, 1995, pp. 608-615.
7. William R. Darden, W.A. French, and RD. Howell, "Mapping Market Mobility: Psychographic Proliles and Media Exposure," Journal of Business Research, Vol. 7, No.8, 1979, pp. 51-74.
8. Duane L. Davis and Ronald S. Rubin, "Identifying the Energy-Conscious Consumer: The Case of the Opinion Leader," Journal of the Academy of Marketing Science, Spring 1983, p. 185.
9. Ten-y Elrod and Russel S. Winer, "An Empirical Evaluation of Aggregation Approaches for Developing Market Segments," Journal ofMar-keiing Vol. 46, No.4, Fall 1982, pp.32-34.
10. RonaJd Frank, William Massey, and Yoram Wind, Market Segmentation, Englewood Cliffs, N.J.: Prentice-Hall, 1972.
11. Martha Farnsworth, "Psychographies for the 1990s," American Demographics, July 1989, pp. 25, 28-30.
12. H.H. Kassarjian, "Personality and Consumer Behavior: A Review," Journal of Marketing Research, Vol. 8, November 1971.
13. William D. Wells, "Psychographies: A Critical Review," Journal 0/ Marketing Research, May 1975, pp. 196-213.
14. Joseph T. Plummer, "The Concept and Application of Life Style Segmentation," Journal o/Marketing, January 1974, p. 33.
15. David J. Reibstein, Christopher H. Lovelock, and Ricardo de P. Dob-son, "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.
16. Benson P. Shapiro and Thomas Y. Bonoma, "How to Segment Industrial Markets," Harvard Business Review, May-June 1984, pp. 104-110.
CHAPTER3
MARKETING RESEARCH: AN AID TO DECISION MAKING
LEARNING OBJECTIVES
Having completed this chapter, you should'
Understand the role of marketing research .
Understand the marketing research process and the techniques
employed .
DISCOVERING WHY THEY CHEW
JUiCY Fruit Gum, the oldest brand of the Wm. Wrigley Jr. Company, wasn't chewing up the teen market, gum's top demographic. In 1997, the company found itself under pressure from competitors. Sales and market share were down. How could Wrigley make more kids chomp on Juicy Fruit?
What qualities about Juicy Fruit might appeal to teens? Wrigley went to the source to find out. It found kids who chew five sticks or more of Juicy Fruit each week and promptly gave them a homework assignment. Find pictures that remind them of the gum and write a short story about it. From the focus group, Wrigley learned that teens chew Juicy Fruit because it's sweet. It refreshes and energizes them.
Their ad agency, BBDO, confirmed what the teens were saying. BBDO asked more than 400 heavy gum chewers to rate various brands by attributes that best represented them. For Juicy Fruit, respondents picked phrases such as "has the right amount of sweetness" and "is made with natural sweetness."
Another study by BBDO looked into why teens chew gum. Was it because they're stressed out-or because they forgot to brush their teeth before going to school? Nearly three out of four kids said they stick a wad into their mouth when they crave something sweet. And Juicy Fruit was the top brand they chose to fulfill that need (Big Red was a distant second).
Sources: "How Sweet It Is," American Demographics, March 2000, p, S 18; "Flavor du Jour," American Demographics, March 2000, p, SI0; Erika Rasmusson, "Cool for Sale," Sales & Marketing Management, March 1998, pp. 20-22,
INTRODUCTION
Although the marketing research conducted by the Wrigley Co. was fairly simple, it provided a new direcLion for their marketing strategy. BBDO developed four TV commercials
54 CHAPTER 3 MARKETING RESEARCH: AN AIDTO DECISION MAKING
Situation analysis
Goaf setting
jvlarketing strategy
Implementation
Evaluating results
Marketing research
FIGURE 3.1 The marketing planning process
with the "Gatta Have Sweet" theme. Rougilly 70 percent of respondents voluntarily recalled the Juicy Fruit name after watching the commercial (the average recaJT for a brand of sugar gum is 57 percent). Sales of 100-stick boxes of Juicy Fruit rose 5 percent after the start of the ad campaign, reversing a 2 percent decline prior to it. Juicy Fruit's market share also increased from 4.9 percent to 5.3 percent, the biggest gain of any established chewing gum brand during the year following the campaign.
Marketing research addresses the need for quicker, yet more accurate, decision making by the marketer. The impetus for this situation is the complex relationship between the business firm and the ever-changing external environment. In particular, most marketers are far removed from their customers; yet must know who their customers are, what they want, and what competitors are doing. Often the marketer relies on salespeople and dealers for information, but more and more the best source of information is marketing research.
It should be noted that most marketing decisions are still made without the use of formal marketing research. In many cases, the time required to do marketing research is not available. In other cases, the cost of obtaining the data is prohibitive or the desired data cannot be obtained in reliable form. Ultimately, successful marketing executives make decisions on the basis of a blend of facts and intuition.
In this chapter, we provide an overview of the marketmg research process. We start the discussion with a look at business information. As noted in Figure 3.1, marketing research is applicable throughout the marketing planning process.
THE NATURE AND IMPORTANCE OF MARKETING RESEARCH
Informal and, by today's standards, crude attempts to analyze the market date back to the earliest days of the marketing revolution. Only in recent years, however, has the role of research as it relates to management been clearly recognized.
Reflecting this change in orientation, the following definition of marketing research is offered: marketing research is the scientific and controlled gathering of nonroutine mar-
WHAT NEEDS RESEARCHING IN MARKETING? 55
keting information undertaken to help management solve marketing problems. There is often hearty disagreement over the answer to the question of whether marketing research is a science. One's answer depends on the employed definition of "science." To be specific, a research activity should use the scientific method. In this method, hypotheses (tentative statements of relationships or of solutions to problems) are drawn from informal observations. These hypotheses are then tested. Ultimately, the hypothesis is accepted, rejected, or modified according to the results of the test. In a true science, verified hypotheses are turned into "jaws." In marketing research, verified hypotheses become the generalizations upon which management develops its marketing programs. (To simplify our discussion, we will use "questions" as a synonym of "hypothesis.")
The mechanics of marketing research must be controlled so that the right facts are obtained in the answer to the correct problem. The control of fact-finding is the responsibility of the research director, who must correctly design the research and carefully supervise its execution to ensure that it goes according to plan. Maintaining control in marketing research is often difficult because of the distance that separates the researcher and the market and because the services of outsiders are often required to complete a research project, i
WHAT NEEDS RESEARCHING IN MARKETING?
An easy, and truthful, answer to this question is "Everything." There is no aspect of marketing to which research cannot be applied. Every concept presented in this marketing text and every element involved in the marketing management process can be subjected to a great deal of careful marketing research. One convenient way to focus attention on those matters that especially need researching is to consider the elements involved in marketing management. Many important questions relating to the consumer can be raised. Some are:
• Who is/are the customer(s)?
• What does he/she desire in the way of satisfaction?
• Where does he/she choose to purchase?
• Why does he/she buy, or not buy?
• When does he/she purchase?
• How does he/she go about seeking satisfaction in the market?
Another area where research is critical is profits. Two elements are involved. First, there is the need to forecast sales and related costs- resulting in profits. Second, there is the necessity to plan a competitive marketing program that will produce the desired level of .sales at an appropriate cost. Sales forecasting is the principal tool used in implementing the profit-direction element in the marketing management concept. Of course, the analysis of past sales and interpretation of cost information are important in evaluation of performance and provide useful facts for future planning.
A great deal of marketing research is directed toward rather specialized areas of management. These activities are broken down into five major areas of marketing research. Briefly, these activities are:
1. Research on markets- market trends, market share, market potentials, market characteristics, completion, and other market intelligence.
2. Research on sales-sales analysis, sales forecasting, quota-setting, sales territory design, sales performance measurement, trade channels, distribution costs, and inventories.
56 CHAPTER 3 MARKETING RESEARCH: AN AID TO DECISION MAKING
3. Research on products-new product research, product features, brand image, concept tests, product tests, and market tests. (See the following Newsline.)
4. Research on advertising andpromotion-promotion concepts, copy research, media research, merchandising, packaging, adve;tising effectiveness measurement.
5. Research on corporate growth and development—econorrUc and technological forecasting, corporate planning inputs, corporate image, profitability measurement, merger and acquisition studies, and facilities location.
NEWSLINE: HOW EXECS USE RESEARCH
Creating and introducing new products is the most important research priority among marketing executives. The Marketing Science Institute of Cambridge, Massachusetts, surveyed 160 executives from its sponsoring organizations. The executives, representing 60 major consumer and industrial goods and services corporations, were asked to divide 100 points among several research areas.
After successful new product introductions, the executives said that market orientation and customer relationships are the next most important areas Those issues displaced improving the use of marketing information and measuring brand eqUity as the second- and third-highest concerns, respectively, in the previous survey.
"The new research priorities indicate that a shift is taking place in marketing practice," notes Donald Lehmann, executive director of the institute. "Market orientation has taken hold and the increasing power of the consumer is apparent in the movement away from product-driven strategies. Marketers also realize that they need to make choices about who their customers should be and whose needs they are best equipped to meet ... and most significantly, they are looking for better ways to anticipate adoption and diffusion of really new products." Said Marni Clippenger, communications director at MSI, "Companies seem to be shifting away from using the brand to really figuring out what customers want."
Source: Rachel Rosenthal. "New Products Reign as Research Priority," Advertising Age, August 8. 1994, p. 26; Robert McMath, 'To Test or Not To Test," American Demographics, June 1998, p. 64; John McManus, "Mission Invisible," American Demographics, Marcb 1999, p. 6.
1. Marketing research is the scientific and cont(Qlled gath 2. Any business that is consumer-oriented will benefit from
ering of nonroutine marketing information undertaken to marketing research.
help management solve marketing problems. 3. Research can be applied to every facet of marketing.
PROCEDURES ANDTECHNIOUES IN MARKETING RESEARCH
57
Sales forecasts Cost forecasts Product testing Consumer needs Consumer attitudes Consumer product usage Market size/trends Product replacement
Demographic trends
Legislative impact
Price testing
Marketing communication testing
Channel locations
Competition
Psychographic trends
Environmental trends
FIGURE 3.2 Areas of research application
PROCEDURES ANDTECHNIQUES IN MARKETING RESEARCH
Considering the relatively short span of time in which marketing research has developed since the 1930s, it is quite remarkable that so sophisticated and thorough a collection of procedures and techniques should have been developed. In many respects, marketing research has advanced faster than any other specialized area in marketing management. In view of the highly specialized nature of marketing research, it is not possible in this discussion to present more than an outline of the basic procedures and techniques.
It is important for a marketing manager to be familiar with the basic procedures and techniques of marketing research. It is true that many businesspeople will never have occasion to engage personally in marketing research. However, it is quite likely that they will be faced with a need either to supervise an internal marketing research activity or to work with an outside marketing research firm. The manager who understands the research function is in a position to judge intelligently the proposals made by research specialists and to evaluate their findings and recommendations. Occasionally, the manager herself will have to seek solutions to marketing problems. It may not be possible to obtain the services of marketing research specialists. The manager familiar with the basic procedures of fact-finding in marketing should be able to supervise a reasonably satisfactory search for the information required.
There is no single set of steps in a market research procedure that is accepted by all. Indeed, each marketing research problem requires, to some degree, its own peculiar procedure. However, there is general agreement that four major activities should be performed in a thorough marketing research project. These are: (1) making a preliminary investigation; (2) creating the research design; (3) conducting the investigation; and (4) processing the data/reporting results (see Figure 3.3)2
Making a Preliminary Investigation
There are two phases of activity in the preliminary investigation. The first of these involves the determination of the purpose and scope of the research. The second involves an investigation into the marketing environment called the informal assessment.
Determining the Purpose and Scope of the Research
The basic and critical problem in marketing research is seldom the problem that appears on the surface. It is therefore necessary to explore beneath the surface to ascertain the nature and size of the problem. This is the vital first step and must be done correctly, since every subsequent phase of the project is directed at solving the basic problem. For the research
CHAPTER 3 MARKETING RESEARCH: AN AIDTO DECISION MAKING
FIGURE 3.3 The marketing research proc