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Chapter 7

Competition is Everywhere

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Market SegmentationA market segment is a group of individuals or

organizations within a larger market that share one or more important characteristics.

Market segmentation is the process of dividing a large group of consumers into subgroups based on specific characteristics and common needs.

Mass marketing directs a company’s marketing mix at a large and heterogeneous group of customers. All customers are considered potential customers. Frameworks 5.6

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Market Segmentation Each person can be a part of more than one market segment.

Businesses use marketing information and market research to complete market segmentation.

Most products are sold using market segmentation.

Companies that use the marketing concept will use market segmentation.

Mass marketing might allow greater sales volume and some cost savings, but it is not usually as effective as a segmentation strategy.

Frameworks 5.5

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Mass MarketingOil Companies tend to use Mass Marketing

Frameworks 5.6

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Mass MarketingSoft drinks tend to be mass marketed

Frameworks 5.6

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Market SegmentationSoft drink companies also use

market segmentation

http://en.wikipedia.org/wiki/List_of_Coca-Cola_brands

Frameworks 5.6

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Market Segmentation CategoriesSegmentation categories

◦Geographic segmentation◦Demographic characteristics◦Psychographics◦Product usage◦Benefit expectations

Frameworks 5.5

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Market SegmentationGeographic

market segmentation is based on the concept that people who live in the same geographic area might have the same needs and wants.

Frameworks 5.5

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Market SegmentationWhat is the BEST state in the United

States for bratwurst sales?

The population of Wisconsin is 42.6% of German ancestry.

Frameworks 5.5

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Market SegmentationDemographic market segmentation consists of

dividing the market based on age, gender, race, income level, ethnicity, educational attainment level, or religious affiliation.

Frameworks 5.5

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Demographic Characteristics of Education and Income

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Market SegmentationExamples of Gender and Age segmentation

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Market Segmentation Psychographic market segmentation is based on people’s

interests and values. This is directly related to lifestyles and social interests.

Frameworks 5.5

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Market Segmentation Psychographic market segmentation …

Professional game player Jonathan Wendel of St. Louis, MO goes by the handle Fatal1ty.

Frameworks 5.5

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Market SegmentationProduct usage

segmentation refers to how often a consumer uses a product and/or the amount used.

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Market SegmentationSegmentation based on benefit expectations divides

consumers into groups based on the benefit they expect from the product.

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Market SegmentationThe business

market can also be segmented.

Video: Jonathan Wendel

Professional game player Jonathan Wendel of St. Louis, Missouri goes by the handle Fatal1ty.

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Identifying and AnalyzingMarket SegmentsA market opportunity is an identified market with

excellent potential based on careful research.

Market potential is the total revenue that can be obtained from the market segment.

Target markets should be selected from the segments that have the greatest potential.

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Identifying and AnalyzingMarket Segments

One method of positioning a product is to associate a personality or type of user with the product.

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One method of positioning a product is to associate a personality or type of user with the product.

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Identifying and AnalyzingMarket Segments

If the market potential for gasoline sales in one community is $10,385,990 and oneconvenience store has a market share of 8%, the value of its gasoline sales is …

$830,879.20

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Determining Market Potential

1. Number of potential customers2. Interest in the product or service and

other mix elements3. Money available to make the purchase4. Ability to communicate with and

distribute product to consumers

Video: Echo Boomers

Whether you call them "echo boomers," "Generation Y" or "millennials," they already make up nearly a third of the U.S. population, and already spend $170 billion a year of their own and their parents' money. Born between 1982 and 1995, there are nearly 80 million echo boomers, and they’re already having a huge impact on entire segments of the economy.

Market ShareMarket share is a firm’s percentage of the total sales volume generated by all competitors in a given market.

“In a sign of Apple's continued dominance of the market for hard drive-based portable

players, research company NPD has claimed that the iPod now accounts for 82% of the US

retail market, compared to 64% 12 months ago.”

Market PositionMarket position refers to the unique image of a product or service in a consumer’s mind relative to similar competitive offerings.

“McDonald’s continues to be the fast food restaurant leader with international sales totaling $14 billion.”

The image a product projects.

Lucky Brand Sonic Wonder Jean

$ 96

Wrangler Jeans$ 17.99

The Buckl

e

Market Positioning

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Product Positioning for Competitive AdvantageThe various bases for positioning a product to

distinguish it from the competition. ◦Attribute – “whiter teeth”◦Price and quality – “lowest price” or “best quality”◦Use or application – Arm & Hammer baking soda◦Product user – “The Pepsi Generation”◦Product classification – “Pork: The Other White Meat”◦Competitor – “Apple is better than a PC”

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Product Positioning for Competitive Advantage

Use or application – Arm & Hammer baking soda

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Product Positioning for Competitive Advantage

Product user – “The Pepsi Generation”

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Selecting a Positioning StrategyConsumer perceptions are the images

consumers have of competing goods and services in the marketplace.

Competition – a business wants to be considered superior to their competitors.

Business environment – businesses must pay attention to changes in the business environment – emphasis on green marketing, new technology, negative publicity, or concerns about health issues.

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Selecting a Positioning StrategyOne method of

positioning a product is to associate a personality or type of user with the product.

The type of competition faced by a business will affect it positioning.

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Selecting a Positioning StrategyPositioning based on a direct competitor

Justin Long is how old?

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Competing for Market SegmentsDirect vs. Indirect Competition

Direct competition occurs with businesses that offer the same type of product or service.

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Competing for Market SegmentsDirect vs. Indirect Competition

Indirect competition occurs when a

business competes with

other companies offering products that are not in the

same category but satisfy a similar need.

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Competing for Market SegmentsPrice vs. non-price competition

Chapter 7

Price competition is a rivalry among businesses on the basis of price and value.

Frameworks 5.4.2

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Competing for Market SegmentsPrice vs. non-price competition

Non-price competition occurs when businesses decide to emphasize factors of their marketing mix other than price.

Frameworks 5.4.2

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Collecting Competitive InformationMarket intelligence is the process of gaining competitive

market information.Information Sources

◦Salespeople and other employees◦Analysis of competitors’ products.◦Articles, research reports, and public information ◦Professional and trade publications◦Customers and customer records◦Trade shows – exhibitions where companies associated with

an industry gather to showcase their products.◦The Internet

Ethics in information gathering – stealing proprietary information is unethical and can be illegal. A business can’t bribe the employee of another business in order to get confidential information.

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Benefits of Competition Competition forces businesses to offer reasonable

prices for the products and services that consumers use.

Competition encourages improvements in products with the addition of unique features and benefits.

Businesses are always looking for new and improved products to match their competition.

Competition offers consumers the benefit of a wide variety of products from which to choose.

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Bill Gates is an entrepreneur and chairman of Microsoft, the software company he founded with Paul Allen. He is ranked by Forbes magazine as the wealthiest man in the world with a net worth of over $50 billion.

Who is Bill’s BIGGEST

competitor?

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Larry Ellison is an entrepreneur and founder of the Oracle Corporation, a major software company. He is listed on the Forbes list of billionaires as the fourth richest person in the world.

Video: The most competitive man in the world.

E-Commerce and Virtual

Marketing

Chapter 8

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What is E-Commerce?E-commerce involves business activities, including

the exchange of goods services, and information, completed electronically via the Internet.

A click-only business completes almost all of its activities through the Internet.

A brick-and-mortar business completes most of its activities by means other than the internet. They rely on actual buildings and/or retail stores.

A brick-and-click business is a company that combines traditional business operations with the use of the Internet.

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Stages of E-commerce DevelopmentStages of development

◦Information stage – the business’s website just provides information to prospective customers.

◦Interaction stage – the website begins to offer a method of interaction with customers, usually via e-mail.

◦Full integration stage – the website will allow customers to get all the information needed to select, order, pay for, track, and if needed, return their purchases. Example: Amazon.com

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Advantages of E-commerceInstant communication with computers,

and wireless devices.Instant research information for the

business.Open for business 365 days a year, 24

hours a day.Development of new products. Example:

The E-ticket for concerts and airlines. Ease of competition and entering of new

markets.

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Cost Savings

Product SavingsComputer software 99%Banking services 89%Airline tickets 87%Stocks 78%Books 56%Toys and gifts 48%

Average Cost Savings for Businesses when Customers Use the Internet to Make Purchases

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Disadvantages of E-commerceCustomers might not

know exactly what they are getting.

Difficult to return purchases.

Lack of personal interaction.

Difficult to predict demand due to the constant change in consumer behavior.

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Growth of the InternetThe internet was first developed in the 1950’s

as a military and research tool. E-commerce did not begin until 1991 with the

introduction of the World Wide Web.Approximately one billion people around the

world can access the internet.The United States has 211 million users, or

21%, of the world’s internet users. This has decreased from 50% ten years ago.

China’s internet users have tripled in 4 years, but still reaches only 10% of the population.

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The development of the personal computer in the

late 1970’s eventually

allowed for the development of e-

commerce. Bill Gates is credited with creating the software needed

for operating millions of personal

computers. But … who actually CREATED the first real personal computer??

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Steve Wozniak (along with Steve Jobs) is credited with creating the FIRST personal computer marketed to average consumers.

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Growth of the InternetCountries with the highest number of Internet users in 2007 (in millions)

NumberCountry

of UsersUnited States

211China

137Japan

86Germany

51India

40United Kingdom

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NumberCountry

of UsersSouth Korea

34Brazil

32France

31Italy

31Russia

24Canada

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Growth of the InternetB2C (business-to-consumer) Internet sales

in the U.S. were $110 billion in 2006, and growing by 24% per year.

B2B (business-to-business) Internet sales for 2007 were $800 billion.

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Business Uses of the InternetEfficient communication … e-mail, chat

rooms, blogs, webcams, and webinars.Gathering information about customers,

including mailing addresses and feedback about products.

Improving operations by allowing salespeople to access inventory records and track shipments. Also allows small businesses to sell products almost anywhere in the world

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Marketing Via the InternetVirtual marketing is the completion of

marketing activities primarily through the use of computer and internet technologies.

A product fulfillment center provides some or all of the activities required to fill customer needs.

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The Role of Promotion for E-CommerceMore companies are using the Internet for

advertising, from $2 billion in 1998 to $9.7 billion in 2007.

A pop-up is an advertisement that opens in a new window when a web page is being viewed.

Rich media includes a variety of digital technologies that provide interactive multimedia experiences for users.

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The Role of Promotion for E-CommerceWeb sponsorship – a bank might sponsor

a website that helps consumers understand how to purchase a car using installment credit.

Priority placement – most search engines allow companies to pay to have their web site appear at the top of the list when the search results are show.

Business blogs are regularly updated on-line journals written by company experts.

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Viral MarketingA marketing strategy that encourages people to pass

along a marketing message.Successful viral marketing depends on a high pass-

along rate from person to person.The pass-along rate is

usually dependent upon the uniqueness or humor of the ad.

Viral marketing can utilize social networking sites such as Facebook, MySpace, and YouTube as well as e-mail, text messaging, and instant messaging.

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Hint … his company is the king of viral marketing!

Who is This Person?

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Customer Satisfaction withTypes of Shopping

Type % satisfiedShopping online 73%Shopping in stores 60%Shopping with catalogs 56%

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Features Likely to IncreaseOnline PurchasingClose-up images of productsInformation on product availabilityProduct comparison guidesAn easy-to-use search functionToll-free customer service numberConsumer reviews and product

evaluationsAn easy-to-use “shopping cart” and

check out feature

TEST

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