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This assignment must be completed in APA FORMAT with IN-TEXT CITATIONS.. This paper requires a 1200 WORD REQUIREMENT and MUST include a REFERENCE PAGE. NO PLAGIARISM! This MUST be submitted to me by Saturday October 3, 2020 at 11:30pm (CENTRAL TIME). THIS MUST BE SUBMITTED ON TIME! NO EXCEPTIONS!

Week 3 complete

1. Read the case “Real Choices at Sprig” beginning on page 230. Incorporate the following topics in an essay format in the order depicted below using at least 1200 words demonstrating an understanding of both the READ and ATTEND sections. Select at least three appropriately related scholarly sources from the online Bethel Library Database and the textbook to incorporate into your work. Follow APA format. Refer to the grading rubric for evaluation details.

· Evaluation of both the internal and external environments of Sprig based on what was presented in the case

· Description of Sprig’s competitive advantage including a positioning statement articulating the specific value offered by Sprig

· Identification and discussion of two additional target markets upon which Sprig should focus along with justification

Chapter 3

Stephanie Nashawaty
A Decision Maker at Oracl

Stephanie Stewart Nashawaty is group vice president of customer experience (CX) transformation sales at Oracle.
She has more than 15 years of software sales experience and extensive expertise in enterprise marketing solu-
tions for Global 2000 leading companies.

Stephanie is currently responsible for CX sales at Oracle (this includes Oracle’s application solutions for
customer-facing functions, such as sales, services, and marketing). She leads an elite sales team of enterprise
sales executives who are tasked with creating and delivering $1 million to $30 million Cloud deals with
Oracle’s most strategic customers. In this capacity, Stephanie also works on joint business development
opportunities with selected systems integrators, such as Accenture and Deloitte, as well as digital agencies.

Prior to joining Oracle, Stephanie was a vice president with Unica Corporation, which was acquired by IBM
in 2010. She helped to build and launch IBM’s Enterprise Marketing Management (EMM) business unit. The unit’s focus on “Smarter Marketing” is
a key foundational pillar of IBM’s current “Smarter Planet” campaign and go-to-market strategy. Stephanie led the EMM global sales team ($400
million in annual revenues), which focused on selling to the office of the chief marketing officer (CMO). She was recognized for her achievements
and team contribution by her selection for IBM’s Acquisition Talent Acceleration Program. During this time, she was also the executive sales leader
for the acquisition and integration of three companies in the marketing domain (DemandTec, Tealeaf, and Xtify). Stephanie has significant inter-
national experience working with CMOs in retail, travel, telecommunications, and other industries focused on optimizing the customer experience
with a brand across all channels.

Stephanie holds a BA in political science from the University of Vermont and was a candidate in the master’s degree program at Stanford
University. She and her family reside in Needham, Massachusetts.

Strategic Market

Planning

3.1 Explain business planning and

its three levels. pp. 68–70

BUSINESS PLANNING: COMPOSE THE
BIG PICTURE p. 68

3.2 Describe the steps in strategic
planning. pp. 71–77

STRATEGIC PLANNING: FRAME THE
PICTURE p. 71

3.3 Describe the steps in market
planning. pp. 77–84

MARKET PLANNING: DEVELOP AND
EXECUTE MARKETING STRATEGY
p. 77

Check out the Chapter 3 Study Map
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What I do when I’m not
working?
Spend time with my two teenage
daughters, ideally doing something
outside like hiking, swimming, skiing,
and tennis.

First job out of school?
Management trainee, Enterprise
Rent-A-Car.

Career high?
Selected for IBM’s Acquisition Talent
Acceleration Program. Less than 1 percent
of IBM employees were selected for this
program.

Business book I’m reading now?
Converge: Transforming Business at the
Intersection of Marketing and Technology
by Bob Lord and Ray Velez.

My motto to live by?
“Don’t let the perfect be the enemy of the
good,” that is, execute and iterate rather
than be stuck in overanalyzing decisions.

What drives me?
Fear of failure.

My management style?
Collaborative and decisive.

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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.

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Here’s my problem…

Oracle is a huge player in a booming industry that helps
businesses manage the vast amount of information they

need to operate. Its initial business focus was on relational databases. For ex-
ample, the global communications company British Telecom (BT) uses Oracle’s
database solution to increase control and improve customer service with a
streamlined global information technology (IT) infrastructure and standardized
database administration. With Oracle’s help, BT can now deploy a database
in 20 minutes as compared to the several weeks this task required before the
company used Oracle’s solution.

Companies now have the ability to access an incredible amount of infor-
mation about customers and prospects. These data points come from all of our
interactions with a brand, including online web-surfing behavior, interactions in
stores and kiosks, our calls into service call centers, and even when we tweet
about an airline losing our baggage. Marketing departments need automation
technology to help them make sense of all of the data and to interact with
their loyal customers on an almost constant basis. Today, U.S. companies spend
more than $1.5 trillion per year on marketing technologies. The research firm
Gartner predicts that by 2017, a typical firm’s CMO will spend more on tech-
nology than will its chief information officer (CIO).

As business operations become more complex, the demand for change in
IT increases, along with the associated risks a company has to address. Today’s
IT professionals are asked to manage a flood of information and to deliver it
to their users in a timely manner with ever-increasing quality of service. And in
today’s economic climate, IT must also reduce budgets and derive greater value
out of existing investments.

Over the years, Oracle has moved into offering software applications that
help all of the various lines of business, such as human resources and sales,
to do their jobs better. Oracle acquired its customer relationship management
(CRM) application when it bought Siebel Systems in 2005. Siebel CRM is an
on-premise application that allows salespeople to manage their prospects
and accounts and forecast their business. It is the key to maintaining contact
with the client’s customers. For example, a company that maintains a loyalty
program where it tracks consumers’ transactions and awards points and other
goodies in return has to monitor thousands and sometimes even millions of
interactions every month.

It’s a huge understatement to say that the technological environment
is changing rapidly. In particular, the industry is moving toward a new model
called software as a service (SaaS). Instead of purchasing and installing
software on its own computers, this “software-on-demand” approach allows
a company to take advantage of new “distributed computing” technology.
This approach stores these programs remotely so that a user can access the
software from any location. Users can customize the software, obtain faster
answers, and analyze larger volumes of data, making it easier for clients with
global operations to coordinate data management across locations. Many
people refer to this revolution in information storage as “cloud computing” be-
cause data live “in the cloud” rather than being physically stored in a machine
in the building.

This sea change in the technological environment creates both a huge
opportunity and a big headache for Oracle. The opportunity is that Oracle

traditionally sold its products exclusively to the CIO. Now that the CMO and his
team is so attuned to data-driven decision making, Oracle suddenly finds itself
with an entirely new set of potential customers. Companies will be increasing
their “spend” on sophisticated technology to keep up with a wired world, and
the relative amount of this money they spend across functions will shift toward
fatter marketing budgets for data-related products and services.

The downside: Oracle ironically faces a challenge because it is so suc-
cessful in the on-premise product space, with hundreds of major corporate
clients that equate the company with this traditional solution to data manage-
ment. The company has faced challenges for the past few years as it struggles
with concerns about its ability to compete in a new cloud-based business
environment.

If Oracle tries to change with the times and move its vast number of cli-
ents “to the cloud,” these companies may now think twice about sticking with
the company. A CIO who wants to totally revamp the way his or her company
manages information probably will explore what competing SaaS solutions
companies have to offer. In that case, it would be open season on Oracle’s
clients.

Oracle needs to make important adjustments in its strategic planning to
move to where the market is going. It needs to figure out how to structure its
sales force to go after this new source of revenue and at the same time Oracle
has to rebrand itself as a leader in cloud computing technology. The company
needs to increase its focus on developing new cloud-computing capabilities
or perhaps acquiring other companies that already have SaaS-based solutions
and a sales team that understands this new marketing space.

Oracle needs to win in the emerging cloud-based market but at the
same time retain the loyalty of its existing client base. The company needs to
convince CMOs that it still has the ability to solve their most pressing database
marketing challenges and that Oracle’s solutions will help them acquire, upsell,
and retain customers as the business world continues to move to the cloud.

Stephanie considered her Options 1 � 2 � 3

Option

Stay the course with marketing clients. Oracle is ex-
tremely successful as a premise-based solutions provider. The com-
pany still boasts a huge roster of corporate clients that are satisfied
with what it does for them. A shift to cloud-based solutions will
confuse these clients and open the door to a host of competitors.
Of course, the long-term writing is on the wall: CMOs will continue

to move their operations to the cloud and over time Oracle may be stuck with
obsolete technologies and lose its reputation as an industry innovator.

Real People, Real Choices

See what option Stephanie chose in

MyMarketingLab™

You Choose
Which Option would you choose, and why?

Option 1 Option 2 Option 3

Improve Your Grade!

Over 10 million students improved their results using the Pearson MyLabs.
Visit mymktlab.com for simulations, tutorials, and end-of-chapter problems.

MyMarketingLab™

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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.

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Option

Acquire companies that already offer new SaaS marketing technologies. Go
to market with a dedicated sales team that focuses only on selling cloud solutions to current and
new clients. If Oracles buys up companies with this expertise, it will quickly acquire a customer
base, products, and organization that were designed exclusively for this technology. These new
products also will cross-pollinate across Oracle so that its own software engineers will come up to

speed quickly on state-of-the-art applications. This choice would also create an immediate revenue stream from
SaaS clients, and Oracle will be able to rebrand itself as an organization that truly is on the cutting edge of
database management. On the other hand, it will be expensive to acquire these companies. Oracle’s biggest
rivals, including IBM, Salesforce.com, Adobe, and SAP, also are on the lookout for them, so the company might
find itself in bidding wars that could up the ante quite a bit. An acquisition strategy might also create market
confusion about what Oracle sells, and in addition the company’s strategic partners are not as familiar with
these new offerings as they are with legacy applications like Siebel. In fact, Oracle might lose clients who use
the Seibel system now if they decide the company is not committed to the platform for the long haul. Finally, it
was unclear if the salespeople at these smaller companies would stick with Oracle after it acquired their employ-
ers. Some of them might prefer to work for a young start-up rather than a huge corporation.

Option

Stick to your knitting. Continue to promote the Siebel system for basic data management
function. “De-invest” in the marketing solutions category, where it will be expensive to compete
against the numerous other companies that were gearing up to swoop into this market. This would
be a much less costly decision because Oracle would not have to spend the billions of dollars it
would probably take to acquire new companies as in option 2. As is the case with option 1, Oracle

already is well known as a market leader in database solutions. The messages it would send to the market would
be much simpler and more straightforward, and it would benefit from a sales force that already knows the
product and is familiar to clients.

However, Oracle would have to counter the perception that the company is trying to “ride an old horse” in a
technology industry that richly rewards innovative solutions. In a few years, it may find itself the market leader in an
obsolete category as all kinds of businesses eventually migrate to the cloud. Oracle might well find itself “penny wise
and pound foolish” if it focuses on what it does well right now but fails to invest in the marketing category. By all
indications, marketing functions will account for a steadily increasing share of the money that organizations spend
on technology. If Oracle decides to enter this lucrative but competitive category down the road, it may discover that
the ship has already sailed.

Now, put yourself in the team’s shoes. Which option would you choose, and why?

Business Planning: Compose
the Big Picture
There’s an old saying in business that “planning is everything”—well,
almost. Planning allows a firm like Oracle to define its distinctive
identity and purpose. Careful planning enables a firm to speak in a
clear voice in the marketplace so that customers understand what the
firm is and what it has to offer that competitors don’t—especially as it
decides how to create value for customers, clients, partners, and society

at large. In this chapter, you will experience the power of effective business planning—and
especially market planning—and lay the groundwork for your own capability to do suc-
cessful planning.

We think this process is really important. That’s why we’re starting with a discus-
sion about what planners do and the questions they need to ask to be sure they keep their
companies and products on course. In many ways, developing great business planning is
like taking an awesome digital photo with your smartphone (maybe a “selfie”?)—hence
the title of this section. The metaphor works because success in photography is built
around capturing the right information in the lens of your camera, positioning the image
correctly, and snapping the picture you’ll need to set things in motion. A business plan is
a lot like that.

The knowledge you gain from going through a formal planning process is worth its
weight in gold. Without market planning as an ongoing activity in a business, there’s no

3.1
OBJECTIVE
Explain business
planning and its
� ��*��#�

(pp. 68–70)

Chapter 3

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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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C H A P T E R 3 | S T R AT E G I C M A R K E T P L A N N I N G 69

real way to know where you want the firm to go, how it will get there, or even if it is on the
right or wrong track right now. There’s nothing like a clear road map when you’re lost in
the wilderness. And speaking of road maps, we even include a handy guide as a supple-
ment at the end of this chapter that shows you step-by-step how to build a marketing plan
and where to find the information throughout the book to be able to do it. This road map
will be highly useful as you make your way through the book, keeping the “big-picture”
viewpoint of marketing in mind no matter which chapter you’re reading.

What exactly is business planning? Put simply, it’s an ongoing process of decision
making that guides the firm in both the short term and the long term. Planning identifies
and builds on a firm’s strengths, and it helps managers at all levels make informed deci-
sions in a changing business environment. Planning means that an organization develops
objectives before it takes action. In large firms like IBM and Ford, which operate in many
markets, planning is a complex process involving many people from different areas of the
company’s operations. At a small business like Mac’s Diner in your hometown, however,
planning is quite different in scope. Yet regardless of firm size or industry, great planning
can only increase the chances of success.

In the sections that follow, we’ll look at the different steps in an organization’s
planning. First, we’ll see how managers develop a business plan to specify the deci-
sions that guide the entire organization or its business units. Then we’ll examine the
entire strategic planning process and the stages in that process that lead to the develop-
ment and implementation of a marketing plan—a process and resulting document that
describes the marketing environment, outlines the marketing objectives and strategies,
and identifies how the company will implement and control the strategies embedded
in the plan.

The Three Levels of Business Planning
We all know in general what planning is—we plan a vacation or a great Saturday night
party. Some of us even plan how we’re going to study and get our assignments completed
without stressing out at the last minute. When businesses plan, the process is more com-
plex. As Figure 3.1 shows, planning occurs at three levels: strategic, functional, and
operational. The top level is big-picture stuff, whereas the bottom level specifies the “nuts-
and-bolts” actions the firm will need to take to achieve these lofty goals.

business planning
An ongoing process of making decisions that
guides the firm both in the short term and in the
long term.

business plan
A plan that includes the decisions that guide the
entire organization.

marketing plan
A document that describes the marketing
environment, outlines the marketing objectives
and strategy, and identifies how the company
will implement and control the strategies
embedded in the plan.

Strategic Planning

Planning done by top-level
corporate management

Functional (Market)
Planning

Planning done by top
functional-level management
such as the firm’s chief
marketing officer (CMO)

Operational Planning

Planning done by
supervisory managers

1. Define the mission
2. Evaluate the internal and
external environment
3. Set organizational or
SBU objectives
4. Establish the business
portfolio (if applicable)
5. Develop growth
strategies

1. Perform a situation
analysis
2. Set marketing objectives
3. Develop marketing
strategies
4. Implement and control the
marketing plan

1. Develop action plans
to implement the
marketing plan
2. Use marketing
metrics to monitor
how the plan is
working

Figure 3.1 Snapshot | Levels of Business Planning
During planning, an organization determines its objectives and then develops courses of action to accomplish them.
In larger firms, planning takes place at the strategic, functional, and operational levels.

Source: Copyright © American Marketing Association.IS
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First-Level Planning

Strategic planning is the managerial decision process that matches the firm’s resources
(such as its financial assets and workforce) and capabilities (the things it is able to do
well because of its expertise and experience) to its market opportunities for long-
term growth. In a strategic plan, top management—usually the chief executive officer
(CEO), president, and other top executives—define the firm’s purpose and specify
what the firm hopes to achieve over the next five years or so. For example, Oracle’s
strategic plan may set an objective to increase total revenues by 20 percent in the next
five years.

Large firms, such as the Walt Disney Company, have a number of self-contained divi-
sions called strategic business units (SBUs)—individual units that represent different areas
of business within a firm that are unique enough to each have their own mission, business
objectives, resources, managers, and competitors. Disney’s SBUs include parks and resorts,
media networks, consumer products and interactive media, and studios. Hence, strate-
gic planning occurs both at the overall corporate level (Disney headquarters in Burbank,
California, plans for the whole corporation globally) and at the SBU level. We’ll discuss
these two levels later in the chapter.

Second-Level Planning

The next level of planning is functional planning. This level gets its name because it in-
volves the various functional areas of the firm, such as marketing, finance, and human
resources. Vice presidents or functional directors usually do this. We refer to the functional
planning that marketers do as market planning. The person in charge of such planning
may have the title of director of marketing, vice president of marketing, chief marketing
officer, or something similar. Such marketers might set an objective to gain 40 percent of
a particular market by successfully introducing three new products during the coming
year. This objective would be part of a marketing plan. Market planning typically includes
both a broad three- to five-year marketing plan to support the firm’s strategic plan and a
detailed annual plan for the coming year.

Third-Level Planning

Still farther down the planning ladder are the managers who are responsible for plan-
ning at a third level called operational planning. In marketing, these include people
such as sales managers, marketing communication managers, brand managers, and
market research managers. This level of planning focuses on the day-to-day execution
of the functional plans and includes detailed annual, semiannual, or quarterly plans.
Operational plans might show exactly how many units of a product a salesperson needs
to sell per month or how many TV commercials the firm will place on certain networks
during a season. At the operational planning level, a manager may develop plans for a
marketing campaign to promote the product by creating buzz via social media.

Of course, marketing managers don’t just sit in their offices dreaming up plans with-
out any concern for the rest of the organization. Even though we’ve described each layer
separately, all business planning is an integrated activity. This means that at an organization
like Oracle, strategic, functional, and operational plans must work together for the benefit
of the whole, always within the context of the organization’s mission and objectives. So
planners at all levels must consider good principles of accounting, the value of the com-
pany to its stockholders, and the requirements for staffing and human resource manage-
ment—that is, they must keep the big picture in mind even as they plan for their little
corner of the organization’s world.

In the next sections, we’ll further explore planning at each of the three levels that
we’ve just introduced.

strategic planning
A managerial decision process that matches an
organization’s resources and capabilities to its
market opportunities for long-term growth.

strategic business units (SBUs)
Individual units within the firm that operate
like separate businesses, with each having its
own mission, business objectives, resources,
managers, and competitors.

functional planning
A decision process that concentrates on
developing detailed plans for strategies and
tactics for the short term, supporting an
organization’s long-term strategic plan.

market planning
The functional planning marketers do. Market
planning typically includes both a broad three-
to five-year marketing plan to support the firm’s
strategic plan and a detailed annual plan for the
coming year.

operational planning
A decision process that focuses on developing
detailed plans for day-to-day activities that carry
out an organization’s functional plans.

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Strategic Planning:
Frame the Picture
Many large firms realize it’s risky to put all their eggs in one
basket and rely on only one product, so they have become mul-
tiproduct companies with self-contained divisions organized
around product lines or brands.

In firms with multiple SBUs (as illustrated previously by
Disney), the first step in strategic planning is for top management to establish a
mission for the entire corporation. Top managers then evaluate the internal and
external environments of the business and set corporate-level objectives that
guide decision making within each individual SBU. In small firms that are not
large enough to have separate SBUs, strategic planning simply takes place at the
overall firm level. Whether or not a firm has SBUs, the process of strategic plan-
ning is basically the same. Let’s look at the planning steps in a bit more detail,
guided by Figure 3.2.

Step 1: Define the Mission

Ideally, top management’s first step in the strategic planning stage is to answer ques-
tions such as the following:

What business are we in?

What customers should we serve?

How should we develop the firm’s capabilities and focus its efforts?

In many firms, the answers to questions such as these become the lead items in the organi-
zation’s strategic plan. The answers become part of a mission statement—a formal docu-
ment that describes the organization’s overall purpose and what it intends to achieve in
terms of its customers, products, and resources. For example, Twitter’s mission statement
is “To give everyone the power to create and share ideas and information instantly, without
barriers.”1 The ideal mission statement is not too broad, too narrow, or too shortsighted.
A mission that is too broad will not provide adequate focus for the organization. It doesn’t
do much good to claim, “We are in the business of making high-quality products” or “Our
business is keeping customers happy,” because it is hard to find a firm that doesn’t make
these claims. It’s also important to remember that the need for a clear mission statement
applies to virtually any type of organization.

Step 2: Evaluate the Internal and External Environment
The second step in strategic planning is to assess the firm’s internal and external en-
vironments. We refer to this process as a situation analysis, environmental analysis, or
sometimes a business review. The analysis includes a discussion of the firm’s internal
environment, which can identify a firm’s strengths and weaknesses, as well as the ex-
ternal environment in which the firm does business so the firm can identify opportuni-
ties and threats.

By internal environment we mean all the controllable elements inside a firm that influ-
ence how well the firm operates. Internal strengths may lie in the firm’s technologies. What
is the firm able to do well that other firms would find difficult to duplicate? What patents
does it hold? A firm’s physical facilities can be an important strength or weakness, as can
its level of financial stability, its relationships with suppliers, its corporate reputation, its
ability to produce consistently high-quality products, and its ownership of strong brands

mission statement
A formal statement in an organization’s
strategic plan that describes the overall purpose
of the organization and what it intends to
achieve in terms of its customers, products, and
resources.

situation analysis
An assessment of a firm’s internal and external
environments.

internal environment
The controllable elements inside an
organization, including its people, its facilities,
and how it does things that influence the
operations of the organization.

3.2
OBJECTIVE
Describe the steps in
strategic planning.

(pp. 71–77)

Step 1: Define the Mission

Step 2: Evaluate the Internal and
External Environment

Step 3: Set Organizational or
SBU Objectives

Step 4: Establish the Business Portfolio

Step 5: Develop Growth Strategies

Figure 3.2 Process | Steps in Strategic
Planning

The strategic planning process includes a series of steps
that results in the development of growth strategies.

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in the marketplace. Internal elements include a firm’s structure, organizational culture, and
all sorts of assets—financial and otherwise.

Internal strengths and weaknesses often reside in the firm’s employees—the firm’s
human and intellectual capital. What skills do the employees have? What kind of training
have they had? Are they loyal to the firm? Do they feel a sense of ownership? Has the firm
been able to attract top researchers and good decision makers?

The external environment consists of elements outside the firm that may affect it
either positively or negatively. For Oracle and many other firms, the external environment
for today’s businesses is global, so managers/marketers must consider elements such as
the economy, competition, technology, law, ethics, and sociocultural trends. Unlike ele-
ments of the internal environment that management can control to a large degree, the firm
can’t directly control these external factors, so management must respond to them through
its planning process.

In Chapter 2, you read about the various elements of the external environment in
which marketing takes place, within the context of today’s global enterprise. You gained
an appreciation of why it is important for you to be aware that opportunities and threats
can come from any part of the external environment. On the one hand, trends or currently
unserved customer needs may provide opportunities for growth. On the other hand, if
changing customer needs or buying patterns mean customers are turning away from a
firm’s products, it’s a signal of possible danger or threats down the road. Even successful
firms have to change to keep up with external environmental pressures. Oracle’s business,
like that of most marketing-related suppliers, is greatly impacted by the marketing budgets
of its clients, which in turn are driven by economic conditions and ultimately consumer
demand.

What is the outcome of an analysis of a firm’s internal and external environments?
Managers often synthesize their findings from a situation analysis into a format called
a SWOT analysis. This document summarizes the ideas from the situation analysis. It
allows managers to focus clearly on the meaningful strengths (S) and weaknesses (W)
in the firm’s internal environment and opportunities (O) and threats (T) coming from

outside the firm (the external environment). A SWOT analysis en-
ables a firm to develop strategies that make use of what the firm
does best in seizing opportunities for growth while at the same
time avoiding external threats that might hurt the firm’s sales
and profits.

Step 3: Set Organizational or SBU
Objectives
After they construct a mission statement, top management trans-
lates it into organizational or SBU objectives. These goals are a direct
outgrowth of the mission statement and broadly identify what
the firm hopes to accomplish within the general time frame of the
firm’s long-range business plan. If the firm is big enough to have
separate SBUs, each unit will have its own objectives relevant to
its operations.

To be effective, objectives need to be specific, measurable (so
firms can tell whether they’ve met them), attainable, and sustainable
over time. Attainability is especially important—firms that establish
“pie-in-the-sky” objectives they can’t realistically obtain can create
frustration for their employees (who work hard but get no satisfac-
tion of accomplishment) and other stakeholders in the firm, such

external environment
The uncontrollable elements outside an
organization that may affect its performance
either positively or negatively.

SWOT analysis
An analysis of an organization’s strengths and
weaknesses and the opportunities and threats in
its external environment.

Southwest Airlines has always been very focused on hiring and developing em-
ployees who reflect the “Southwest Spirit” to customers. Anyone who has flown
on Southwest can attest to the fact that the atmosphere is lively and fun, and
flight attendants are likely to do most any crazy stunt—bowling in the aisle or
serenading the captain and first officer (and passengers) with a favorite tune.
One of our favorites is a guy who does galloping horse hooves and neighing
sounds during takeoff and landing. For Southwest, a real strength—one that’s
hard for the competition to crack—lies in this employee spirit.

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as vendors and shareholders who are affected when the firm doesn’t
meet its objectives. That a firm’s objectives are sustainable over time
is also critical—usually there’s little advantage to investing in attain-
ing an objective for only a very short term? This often happens when
a firm underestimates the likelihood that a competitor will come to
market with a better offering. Without some assurance that an objec-
tive is sustainable over time, the financial return on an investment
likely will not be positive.

Objectives may relate to revenue and sales, profitability, the
firm’s standing in the market, return on investment, productivity,
product development, customer satisfaction, social responsibil-
ity, and many other attributes. To ensure measurability, marketers
increasingly try to state objectives in numerical terms. For example,
a firm might have as an objective a 10 percent increase in profit-
ability. It could reach this objective by increasing productivity, by
reducing costs, or by selling off an unprofitable division. Or it might meet this 10 per-
cent objective by developing new products, investing in new technologies, or entering
a new market.

Samsung Electronics recently identified as part of its vision for 2020 two ambitious
goals that include reaching $400 billion in annual revenue and achieving a position as
one of the top five brands in the world. Samsung’s plan to more than double its annual
revenue by 2020 may seem ambitious, but the firm has identified an aggressive roadmap
for enhancing its position within its current industries and markets as well as entering into
new opportunities.2

Step 4: Establish the Business Portfolio
For companies with several different SBUs, strategic planning includes making decisions
about how to best allocate resources across these businesses to ensure growth for the total
organization. Each SBU has its own focus within the firm’s overall strategic plan, and each
has its own target market and strategies to reach its objectives. Just like an independent
business, each SBU is a separate profit center within the larger corporation—that is, each
SBU within the firm is responsible for its own costs, revenues, and profits. These items can
be accounted for separately for each SBU.

Just as we call the collection of different stocks an investor owns a portfolio, the
range of different businesses that a large firm operates is its business portfolio. These
different businesses usually represent different product lines, each of which operates
with its own budget and management. Having a diversified business portfolio reduces
the firm’s dependence on one product line or one group of customers. For example, if
the economy sours and consumers don’t travel as much in a bad year for Disney theme
park attendance and cruises, its managers hope that the sales will be made up by stay-
at-homers who watch Disney’s TV networks and who purchase Mickey Mouse collect-
ibles from the Disney website.

Portfolio analysis is a tool management uses to assess the potential of a firm’s business
portfolio. It helps management decide which of its current SBUs should receive more—or
less—of the firm’s resources and which of its SBUs are most consistent with the firm’s
overall mission. There are a host of portfolio models available. To illustrate how one works,
let’s examine the especially popular model the Boston Consulting Group (BCG) developed:
the BCG growth–market share matrix.

The BCG model focuses on determining the potential of a firm’s existing successful
SBUs to generate cash that the firm can then use to invest in other businesses. The BCG

business portfolio
The group of different products or brands
owned by an organization and characterized
by different income-generating and growth
capabilities.

portfolio analysis
A management tool for evaluating a firm’s
business mix and assessing the potential of an
organization’s strategic business units.

BCG growth–market share matrix
A portfolio analysis model developed by the
Boston Consulting Group that assesses the
potential of successful products to generate cash
that a firm can then use to invest in new products.

Samsung has hefty growth objectives for the remainder of the decade.

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generate significant revenues from its acquisition of Lucasfilm and the intellectual
property within the Star Wars universe. Star Wars Episode VII: The Force Awakens
broke the domestic box office record, ousting Avatar and generating well more than
$2 billion in revenue worldwide.3

Cash cows have a dominant market share in a low-growth potential market. Because
there’s not much opportunity for new companies, competitors don’t often enter the
market. At the same time, the SBU is well established and enjoys a high market share
that the firm can sustain with minimal funding. Firms usually milk cash cows of their
profits to fund the growth of other SBUs. Of course, if the firm’s objective is to increase
revenues, having too many cash cows with little or no growth potential can become a
liability. For Disney, its theme parks unit fits into the cash cow category in that sales

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w
th

R
a

Relative Market Share

High Low

H
ig

h
Lo

Stars: SBUs whose
products have a

dominant market share
in high-growth markets

Question Marks: SBUs
whose products have a

low market share
in high-growth markets

Cash Cows: SBUs
whose products have a
dominant market share

in a low-growth
market

Dogs: SBUs
nobody wants

Figure 3.3 Snapshot | BCG Matrix
The Boston Consulting Group’s (BCG) growth–market share matrix is one way
a firm can examine its portfolio of different SBUs and their related products. By
categorizing SBUs as stars, cash cows, question marks, or dogs, the matrix helps
managers make good decisions about how the firm should grow.

matrix in Figure 3.3 shows that the vertical axis repre-
sents the attractiveness of the market: the market growth rate.
Even though the figure shows “high” and “low” as mea-
surements, marketers might ask whether the total market
for the SBU’s products is growing at a rate of 10, 50, 100, or
200 percent annually.

The horizontal axis in Figure 3.3 shows the SBU’s
current strength in the market through its relative mar-
ket share. Here, marketers might ask whether the SBU’s
share is 5, 25, or perhaps 75 percent of the current market.
Combining the two axes creates four quadrants represent-
ing four different types of SBUs. Each quadrant of the BCG
grid uses a symbol to designate business units that fall
within a certain range for market growth rate and market
share. Let’s take a closer look at each cell in the grid:

Stars are SBUs with products that have a dominant
market share in high-growth markets. Because the
SBU has a dominant share of the market, stars gener-
ate large revenues, but they also require large amounts
of funding to keep up with production and promotion
demands. Hence, stars need investment capital from
other parts of the business because they don’t gener-
ate it themselves. Of course, any profits generated di-
rectly by stars presumably would be reinvested right
back in the star. For example, in recent years, Disney
has viewed its studios as a star and has been able to

cash cows
SBUs with a dominant market share in a low-
growth-potential market.

stars
SBUs with products that have a dominant
market share in high-growth markets.

have been basically steady for an extended period of time. Walt
Disney World in Orlando’s Hollywood Studios closed a number
of attractions to make way for the construction of a 14-acre sec-
tion of the part dedicated to the Star Wars Universe so the park
will remain fresh and appealing for its visitors.4

Question marks—sometimes called “problem children”—are
SBUs with low market shares in fast-growth markets. When
a business unit is a question mark, they key issue is whether
through investment and new strategy it can be transformed
into a star. For example, the firm could pump more money
into marketing the product and hope that relative market
share will improve. But the problem with question marks
is that despite investment many times they make a beeline
straight into the annals of market failures. Hence, the firm

question marks
SBUs with low market shares in fast-growth
markets.

Disney’s retail stores are question marks for the diversified company.

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must carefully evaluate the likelihood that investment in a
question mark will pay off else it may find itself “throwing
good money after bad” if it gains nothing but a negative cash
flow and disappointment. For Disney, its brick-and-mortar
retail operation falls into the question-mark category because
its performance compared to the overall specialty retail market
has somewhat lagged. Like most retail operators today, the
online version of the Disney Store provides a better growth
trajectory than the four walls version.

Dogs command a small share of a slow-growth market. They
are businesses that offer specialized products in limited markets
that are not likely to grow quickly. When possible, large firms
may sell off their dogs to smaller firms that may be able to nur-
ture them—or they may take the SBU’s products off the market.
Disney, being a savvy strategic planner, apparently identified its
Miramax film studio as a long-term dog (to Pluto and Goofy: no
pun intended) because they sold it off in 2010 ending a 17-year involvement with that
studio.5 In addition, in 2011, Disney Vacation Club (its time-share unit) scrapped plans
to launch a major new facility at National Harbor near Washington, D.C.6 This move
was no doubt reflective of the general malaise in the time-share market (also called
“vacation ownership”) since the Great Recession.

Like Disney, Oracle could use the BCG matrix to evaluate its product lines to
make important decisions about where to invest for future growth. It would look
across Oracle’s various offerings to assess the market growth rate and relative market
share, determine the degree to which each is a cash generator or a cash user, and de-
cide whether to invest further in these or other business opportunities.

Step 5: Develop Growth Strategies
Although the BCG matrix can help managers decide which SBUs they should invest in
for growth, it doesn’t tell them much about how to make that growth happen. Should the
growth of an SBU come from finding new customers, from develop-
ing new variations of the product, or from some other growth strat-
egy? Part of strategic planning at the SBU level entails evaluating
growth strategies.

Marketers use the product–market growth matrix, shown in
Figure 3.4, to analyze different growth strategies. The vertical axis

in the matrix represents opportunities for growth either in existing
markets or in new markets. The horizontal axis considers whether the
firm would be better off putting its resources into existing products
or whether it should acquire new products. The matrix provides four
fundamental marketing strategies: market penetration, market devel-
opment, product development, and diversification:

Market penetration strategies seek to increase sales of exist-
ing products to existing markets, such as current users, non-
users, and users of competing brands within a market. The
voice assistant market is relatively crowded with the likes
of Apple’s Siri, Microsoft’s Cortana, and Google Now, but
Amazon has found a way in recent years to introduce a stand-
alone product that has been able to gain increasing adoption.
Amazon’s Echo (and the software it runs on called Alexa) is a

dogs
SBUs with a small share of a slow-growth market.
They are businesses that offer specialized products in
limited markets that are not likely to grow quickly.

Market
penetration

strategy

E
x
is

ti
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g
M

a
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e
ts

M
a
rk

e
t

E
m

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a
si

N
e
w

M
a
rk

e
ts

Market
development

strategy

Product
development

strategy

Diversification
strategy

Existing Products

Product Emphasis

New Products

Figure 3.4 Snapshot | Product–Market Growth Matrix
Marketers use the product–market growth matrix to analyze
different growth strategies.

market penetration strategies
Growth strategies designed to increase sales of
existing products to current customers, nonusers,
and users of competitive brands in served markets.

The recent acquisition of Marvel Comics by Disney most likely will add to the
entertainment company’s stable of stars.

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example, Boeing sells its airplanes in many countries throughout the world, but
it just recently entered the African market for the first time. In recent years as the
U.S. relationship with Cuba has improved, many American companies have begun
to look at this nearby island as a new opportunity for growth close to home. Early
in 2016 Starwood Hotels and Resorts edged out Marriott to become the first U.S.
company in about 60 years to take over the operation of a hotel in Cuba. For global
hotelier Starwood, Cuba represents an attractive market that for decades has been
artificially constrained due to governmental policies.9

Product development strategies create growth by selling new products in exist-
ing markets. Product development may mean extending the firm’s product line by
developing new variations of the item, or it may mean altering or improving the
product to provide enhanced performance. In Southern California, McDonald’s
started a test of healthier breakfast bowls that feature kale, egg whites, and other
nontraditional Mickey D ingredients.10 Riding on the success of their all-day
breakfast menu, such product development tests have the opportunity to gen-
erate considerable additional revenue in this case from more health-conscious
consumers.

Diversification strategies emphasize both new products and new markets to
achieve growth. Coke offers a wide range of brands and products beyond the high
fructose corn syrup goodness of its namesake Coca-Cola, largely in response to
a global backlash on poor nutrition and obesity. With declining sales of the core
brand, recently Coke stepped up efforts to acquire companies such as China’s
Culiangwang Beverages Holding Ltd. that is well known for its multigrain bever-
ages branded as health drinks.11 In addition, Coca-Cola developed products in
recent years such as Coca-Cola Life that shifts to a sweetener called Stevia, a pur-
portedly healthier plant extract. As the demand for healthier products accelerates,
count on Coke to turn to more diversification strategies including opportunities in
emerging economies to replace growth that is waning in its portfolio of traditional
high-calorie products.12

To review what we’ve learned so far, strategic planning includes developing the mis-
sion statement, assessing the internal and external environment (resulting in a SWOT
analysis), setting objectives, establishing the business portfolio, and developing growth
strategies. In the next section, we’ll look at marketers’ functional plans as we examine the
process of market planning.

diversification strategies
Growth strategies that emphasize both new
products and new markets.

voice assistant speaker that enables users to communicate
verbally with the device to make requests to play a specific
song on Spotify or hail an Uber. Through Echo, Amazon
has been able to gain greater market by developing and
highlighting the growing list of integrations available for
the device aimed at adding greater levels of convenience
to different tasks. For Super Bowl 50, Amazon spent big
money on a primetime television spot to feature the Echo
and the Alexa software that it utilizes.7 In the not too
distant future, a user may be able to treat the product as,
among other things, a “virtual teller” capable of perform-
ing different banking activities.8

Market development strategies introduce existing products
to new markets. This strategy can mean expanding into a
new geographic area, or it may mean reaching new cus-
tomer segments within an existing geographic market. For

product development strategies
Growth strategies that focus on selling new
products in existing markets.

market development strategies
Growth strategies that introduce existing
products to new markets.

Cuba is a promising market for American companies now that government
restrictions have been lifted.

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Market Planning:
Develop and Execute
Marketing Strategy
Until now, we have focused on fairly broad strategic plans. This big-
picture perspective, however, does not provide details about how to
reach the objectives we set. Strategic plans “talk the talk” but put the

pressure on lower-level functional-area managers, such as the marketing manager, pro-
duction manager, and finance manager, to “walk the walk” by developing the functional
plans—the nuts and bolts—to achieve organizational and SBU objectives. Because you’re
taking a marketing course and this is a marketing book, our focus at the functional plan-
ning level is naturally on developing marketing plans, which is the next step in planning as
we showed back in Figure 3.1.

The Four Ps of the marketing mix we discussed in Chapter 1 remind us that success-
ful firms must have viable products at prices consumers are willing to pay, a way to promote
the products to the right consumers, and the ability to get the products to the place where
consumers want to buy them.

Making this happen requires a tremendous amount of planning by the marketer. The
steps in this market planning process are quite similar to the steps at the strategic planning
level. An important distinction between strategic planning and market planning, however,
is that marketing professionals focus much of their planning efforts on issues related to the

3.3
OBJECTIVE
Describe the steps in
market planning.

(pp. 77–84)

Ripped from the Headlines
Ethical/Sustainable Decisions
in the Real World
Previously in this chapter, you learned about portfolio management and
the different ways that stars, cash cows, question marks, and dogs are
identified and managed by firms. Within the pharmaceutical industry a
cash cow can take the form of a drug that has been around for a while
and is considered a staple for treating a specific medical condition. This
particular drug might not have a substantially large market, but for those
who suffer from a specific condition it may be the only option. In this
regard we could argue that this drug enjoys a monopolistic position and
that the sensitivity to price for this product is most likely extremely low.
This may especially be true if the drug is prescribed by doctors who view it
as the only suitable option for the condition it treats.

Pharmaceutical firms are under increasing public and governmental
scrutiny to balance societal needs with the profit motive. Traditionally, the
pharma industry argues back that product development costs in bringing
innovative new drugs to market are sky high and approval timelines are very
long. A study by the Tufts Center for the Study of Drug Development pegged
total cost of bringing an approved drug to market at $2.6 billion with a typi-
cal developmental timespan more than 10 years.13

Pharma is a high-risk business model, but when a firm does hit on
the “next big drug,” the payoff is astronomical. One way to help fund in-
novation in this environment is to substantially raise the prices of existing

drugs that serve small specialized markets with low or no growth poten-
tial, but because of the overwhelming need of those patients for the
medicine no drop in revenue would be anticipated (in Chapter 10 we’ll
talk about price changes that do not cause much change in demand as
price inelasticity). Recently, in a scenario played out heavily in the media,
Turing Pharmaceuticals argued that an increase in the price of a dose of
its product Daraprim from $13.50 to a whopping $750 would help the
company invest in the development of new drugs that would benefit far
more consumers. At the time Daraprim served fewer than ten thousand
individuals, but for them it was indeed a potential lifesaver in fighting
a parasitic infection encountered by folks whose immune systems were
compromised. Public outcry against Turing was extreme. The CEO (who
ultimately resigned and was later indicated
on unrelated charges) was reviled as the
“bad boy of biotech” and many other names
unfit to print in a family textbook.14

Although they may be wildly unpopular,
such huge price increases are not illegal.
Pharma firms assume high financial risks, and
not every new medication is a blockbuster.
Most failing along the long road to product
development, forcing those that do succeed
to pay for themselves and also the products
that didn’t make it to the finish line.15

ETHICS CHECK:

Is it appropriate for
pharma companies
to set prices of pre-
scription drugs at
any level they want
based on the needs
of their business?

YES NO

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marketing mix—the firm’s product, its price, promotional approach, and distribu-
tion (place) methods. In the end, as you learned in Chapter 1, marketing focuses on
creating, communicating, delivering, and exchanging offerings that have value, and
market planning plays a central role in making these critical components of market-
ing successful. Let’s use Figure 3.5 as a guide to look at the steps involved in
the market planning process in a bit more detail.

Step 1: Perform a Situation Analysis

The first step to develop a marketing plan is to conduct an analysis of the marketing
environment. In Chapter 2, you learned about four key external elements that impact
marketers: the economic, technological, political and legal, and sociocultural environ-
ments. To do this, managers build on the company’s SWOT analysis and search out
information about the environment that specifically affects the marketing plan. For
example, for Oracle to develop an effective marketing communication program for
any one of its products, it’s not enough to have just a general understanding of the
target market. Oracle needs to know specifically what media potential customers like
to connect with, what messages about the product are most likely to make them buy,
and how they prefer to communicate with the firm about new services and customer

care issues. Oracle also must know how competitors market to customers so that the com-
pany can plan effectively.

Step 2: Set Marketing Objectives

Once marketing managers have a thorough understanding of the marketing environ-
ment, the next step is to develop specific marketing objectives. How do marketing objec-
tives differ from corporate objectives? Generally, marketing objectives are more specific
to the firm’s marketing mix–related elements. Think of the connection between business
objectives and marketing objectives this way: Business objectives guide the entire firm’s

operations, whereas marketing objectives state what the marketing func-
tion must accomplish if the firm is ultimately to achieve these overall
business objectives. So for Oracle, setting marketing objectives means
deciding what the firm wants to accomplish in terms of a product line’s
marketing mix–related elements: product development, pricing strate-
gies, or specific marketing communication approaches.

Step 3: Develop Marketing Strategies:
Target Markets and the Marketing Mix
In the next stage of the market planning process, marketing managers
develop their actual marketing strategies—that is, they make decisions
about what activities they must accomplish to achieve the marketing
objectives. Usually this means they decide which markets to target and
actually develop the marketing mix strategies (product, price, promo-
tion, and place [supply chain]) to support how they want to position
the product in the market. At this stage, marketers must figure out how
they want consumers to think of their product compared to competing
products.

As we mentioned in Chapter 1, the target market is the market
segment(s) a firm selects because it believes its offerings are most likely to
win those customers. The firm assesses the potential demand—the num-
ber of consumers it believes are willing and able to pay for its products—
and decides if it is able to create a sustainable competitive advantage in
the marketplace among target consumers.

Step 1: Perform a Situation Analysis
Step 2: Set Marketing Objectives

Step 3: Develop Marketing Strategies

Step 4: Implement and Control the
Marketing Plan

Figure 3.5 Process Steps in Market

Planning

Lee jeans offers a very diverse product portfolio.

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Marketing mix decisions identify how marketing will accomplish
its objectives in the firm’s target markets by using product, price, pro-
motion, and place. To make the point, we’ll compare several different
airlines’ approaches:

Because the product is the most fundamental part of the market-
ing mix—firms simply can’t make a profit without something to
sell—carefully developed product strategies are essential to achieve
marketing objectives. Product strategies include decisions such as
product design, packaging, branding, support services (e.g., mainte-
nance); if there will be variations of the product; and what product
features will provide the unique benefits targeted customers want.
For example, Alaska Airlines became the first carrier to fly a version
of the Boeing 737 aircraft that offers a type of overhead bin that can
hold 48 percent more luggage than a standard pivot bin.16 If you’ve
ever packed a carry-on bag with the express purpose of not having
to deal with the cost and hassle of checking a bag, only to find when
you get to the gate that the bins are full and you end up checking the bag anyway, you
might be tempted by Alaska’s bigger bins and book them over other carriers.17

A pricing strategy determines how much a firm charges for a product. Of course, that
price has to be one that customers are willing to pay. If not, all the other marketing
efforts are futile. In addition to setting prices for the final consumer, pricing strategies
usually establish prices the company will charge to wholesalers and retailers. A firm
may base its pricing strategies on costs, demand, or the prices of competing products.
In recent years, most airlines have been charging extra fees (checked baggage any-
one?) for services and perks they used to include in the ticket price, a practice known
as debundling, in an effort to increase their revenues. Consumer backlash on such
“nickel-and-diming” for everything led Delta Air Lines began offering a new option
for travelers called Comfort+™ that includes many benefits built back into its price;
these include Sky Priority boarding, premium content on the entertainment console,
Wi-Fi access, alcoholic beverages and premium snacks, and seating with greater leg
room. Travelers can easily add up the individual costs of these “rebundled” services to
determine if Comfort+™ is a good deal for them.18

A promotional strategy is how marketers communicate a product’s value proposition to
the target market. Marketers use promotion strategies to develop the product’s mes-
sage and the mix of advertising, sales promotion, public relations and publicity, direct
marketing, and personal selling that will deliver the message. Many firms use all these
elements to communicate their message to consumers. Emirates, an international airline
company that operates flights to destinations all around the world, has cultivated a
strong association with luxury and comfort through a focus on features and experiences
within its airplanes that are clearly uncommon in today’s commoditized world of air
travel. To heighten public awareness that Emirates is different, the airline launched a
major advertising campaign featuring its new brand ambassador Jennifer Aniston. In
the ad Aniston (on an Emirates plane) emerges from a nightmare in which she was fly-
ing a U.S. carrier that had no walk-up bar, no private bedrooms in the first class cabin,
and no in-flight showers (oh, the horror!). The ad closes with her kibitzing with the bar-
tender about her horrible dream, asking him if the pilots can fly around for another hour
or so to allow her to take advantage of Emirates’ luxury product amenities.19

Distribution strategies outline how, when, and where the firm will make the product
available to targeted customers (the place component). When they develop a distribution
strategy, marketers must decide whether to sell the product directly to the final customer
or to sell through retailers and wholesalers. And the choice of which retailers should be
involved depends on the product, pricing, and promotion decisions. Back in the day,

Many airline passengers today crave a bigger luggage bin as a product feature.

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airlines used to sell tickets in person or by phone directly to customers or
through independent travel agents, but customers now largely purchase
tickets online, often through third-party vendors such as Travelocity. And
there are benefits to this strategy, especially for consumers. For example,
travelers can see at a glance the best airlines fares and flight schedules; they
can get discounts for booking multiple travel services, such as flights, hotels,
and car rentals; and they can get access to top deals such as when Expedia of-
fered 29 percent off on select hotel reservations made using the Expedia app
on February 29, 2016, in celebration of the extra leap year day.20

Step 4: Implement and Control
the Marketing Plan
Once the marketing plan is developed, it’s time to get to work and make it
succeed. In practice, marketers spend much of their time managing the vari-
ous elements involved in implementing the marketing plan. Once Oracle
understands the marketing environment, determines the most appropriate
objectives and strategies, and gets its ideas organized and on paper in the
formal plan, the rubber really hits the road. Like all firms, how Oracle actu-
ally implements its plan is what will make or break it in the marketplace.

During the implementation phase, marketers must have some means
to determine to what degree they actually meet their stated marketing
objectives. Often called control, this formal process of monitoring progress
entails three steps:

1. Measure actual performance.

2. Compare this performance to the established marketing objectives or strategies.

3. Make adjustments to the objectives or strategies on the basis of this analysis. This issue
of making adjustments brings up one of the most important aspects of successful mar-
ket planning: Marketing plans aren’t written in stone, and marketers must be flexible
enough to make such changes when changes are warranted.

For effective control, Oracle has to establish appropriate metrics related to each of its
marketing objectives and then track those metrics to know how successful the marketing
strategy is and determine whether it needs to change the strategy along the way. For ex-
ample, what happens if Oracle sets an objective for the first quarter of a year to increase its
market share for a particular product line by 20 percent but after the first-quarter sales are
only even with those of last year? The control process means that market planners would
have to look carefully at why the company isn’t meeting its objectives. Is it due to inter-
nal factors, external factors, or a combination of both? Depending on the cause, Oracle
would then have to adjust the marketing plan’s strategies (such as to implement product
alterations, modify the price, change distribution channels, or increase or alter promo-
tion). Alternatively, Oracle could decide to adjust the marketing objective so that it is more
realistic and attainable. This scenario illustrates the important point we made earlier in
our discussion of strategic planning: Objectives must be specific and measurable but also
attainable (and sustainable over time) in the sense that if an objective is not realistic, it can
become demotivating for everyone involved in the marketing plan.

For Oracle and all firms, effective control requires appropriate marketing metrics,
which, as we discussed in Chapter 1, are measurements that marketers use to identify
the effectiveness of different strategies or tactics. Two common ways that metrics can
be categorized include: (1) activity metrics, which are focused on measuring and track-
ing specific activities taken within a firm that are part of different marketing processes;
and (2) outcome metrics, which are focused on measuring and tracking specific events
identified as key business outcomes that result from marketing processes. An example

activity metrics
Metrics focused on measuring and tracking
specific activities taken within a firm that are
part of different marketing processes.

outcome metrics
Metrics focused on measuring and tracking
specific events identified as key business
outcomes that result from marketing processes.

control
A process that entails measuring actual
performance, comparing this performance
to the established marketing objectives, and
then making adjustments to the strategies or
objectives on the basis of this analysis.

California’s almond growers have a marketing strategy to increase
consumption by promoting the nut’s health benefits.

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of an activity metric is the number of calls that a salesperson makes to customers over a
month, whereas a related outcome metric is the number of orders gained from sales calls
made during that month.

Metrics are so important in marketing today that you will find extensive treatment
of the topic (along with marketing analytics and “Big Data”) in Chapter 5. For now, it
is important to understand that marketers must balance attention to marketing control
and the measurement of marketing performance against sustainability and corporate
social responsibility (CSR) objectives, which you read about in Chapter 2. Recall that
sustainability has to do with firms doing well by doing good—that is, paying attention to
important issues such as ethics, the environment, and social responsibility as well as the
bottom line. In market planning, we certainly don’t want to drive firms toward strate-
gies that compromise sustainability by focusing only on controlling relatively short-term
aspects of performance.

Today’s CEOs are keen to quantify just how an investment in marketing has an impact
on the firm’s success, financially and otherwise, over the long haul. You’ve heard of the
financial term return on investment (ROI)—in a marketing context we refer to return on mar-
keting investment (ROMI). In fact, it’s critical to consider marketing as an investment rather than
an expense; this distinction drives firms to use marketing more strategically to enhance the
business. For many firms today, ROMI is the metric du jour to analyze how the marketing
function contributes to the bottom line.

So, what exactly is ROMI? It is the revenue or profit margin (both are widely used)
generated by investment in a specific marketing campaign or program divided by the cost
of that program (expenditure) at a given risk level (the risk level is determined by manage-
ment’s analysis of the particular program). Again, the key word is investment—that is, in
the planning process, thinking of marketing as an investment rather than an expense keeps
managers focused on using marketing dollars to achieve specific objectives.21

Here’s a quick and simple example of the ROMI concept. Let’s say that a relatively
routine marketing campaign costs $30,000 and generates $150,000 in new revenue. Thus,
the ROMI for the program is 5.0 (the ROI is five times the investment). If the firm has a
total marketing budget of $250,000 and an objective for new revenue of $1,000,000, then
the ROMI hurdle rate could be considered 4.0 ($1,000,000/$250,000), meaning that each
program should strive to meet or exceed that ROMI benchmark of $4.00 in revenue for
every $1.00 in marketing expenditure. Because the marketing campaign exceeds the ROMI
hurdle rate, it would be deemed acceptable to proceed with that investment.22

For an organization to use ROMI properly it must (1) identify the most appropriate
and consistent measure to apply, (2) combine review of ROMI with other critical marketing
metrics (one example is marketing payback—how quickly marketing costs are recovered),
and (3) fully consider the potential long-term impact of the actions ROMI drives (i.e., is the
impact sustainable for the organization over the long term).23 Fortunately for the marketer,
there are many other potential marketing metrics beyond ROMI that measure specific as-
pects of marketing performance. In Chapter 5 you will encounter other useful metrics that
marketers can use to gauge the level of success of their plans, strategies, and tactics.

Action Plans
How does the implementation and control step actually manifest itself within a marketing
plan? One convenient way is through the inclusion of a series of action plans that support
the various marketing objectives and strategies within the plan. The best way to use action
plans (which also are sometimes called “marketing programs”) is to include a separate
action plan for each important element involved in implementing the marketing plan.
Table 3.1 provides a template for an action plan.

For example, let’s consider the use of action plans in the context of supporting the ob-
jective we came up with for Oracle earlier to increase market share of a particular product
line by 20 percent in the first quarter of the year. To accomplish this, the marketing plan

return on marketing investment
(ROMI)
Quantifying just how an investment in
marketing has an impact on the firm’s success,
financially and otherwise.

action plans
Individual support plans included in a marketing
plan that provide guidance for implementation
and control of the various marketing strategies
within the plan. Action plans are sometimes
referred to as “marketing programs.”

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would likely include a variety of strategies related to how Oracle will use the marketing
mix elements to reach this objective. Important questions will include the following:

What are the important needs and wants of this target market?

How will the product be positioned in relation to this market?

What will be the product and branding strategies?

What will be the pricing strategy for this group?

How will the product be promoted to them?

What is the best distribution strategy to access the market?

Any one of these important strategic issues may require several action plans to implement.
Action plans also help managers when they need to assign responsibilities, time lines,

budgets, and measurement and control processes for market planning. In Table 3.1, notice

Table 3.1 | Action Plan Template
Title of action plan Give the action plan a relevant name.

Purpose of action plan What do you hope to accomplish by the action plan—that is, what specific marketing objective and
strategy within the marketing plan does it support?

Description of action
plan

Be succinct—but still thorough—when you explain the
action plan. What are the steps involved? This is the core of the action plan. It describes what must be
done in order to accomplish the intended purpose of the action plan.

Responsibility for the
action plan

What person(s) or organizational unit(s) are responsible for carrying out the action plan? What external
parties are needed to make it happen? Most importantly, who specifically has final “ownership” of the
action plan—that is, who within the organization is accountable for it?

Timeline for the action
plan

Provide a specific timetable of events leading to the completion of the plan. If different people are
responsible for different elements of the time line, provide that information.

Budget for the action
plan

How much will implementation of the action plan cost? This may be direct costs only or may also
include indirect costs, depending on the situation. The sum of all the individual action plan budget items
will ultimately be aggregated by category to create the overall budget for the marketing plan.

Measurement and
control of the action plan

Indicate the appropriate metrics, how and when they will be measured, and who will measure them.

Is ROMI always appropriate or sufficient to judge marketing’s effective-
ness and efficiency? Here are six common objections to relying exclusively
on ROMI to measure marketing success:

1. In a company’s accounting statements, marketing expenditures tend
to appear as a cost, not an investment. This practice perpetuates the
“marketing-is-an-expense” mentality in the firm.

2. ROMI requires the profit to be divided by expenditure, yet all other
bottom-line performance measures (like the ones you learned in
your finance course) consider profit or cash flow after deducting
expenditures.

3. Calculating ROMI requires knowing what would have happened if
the marketing expenditure in question had never taken place. Few
marketers have those figures.

4. ROMI has become a fashionable term for marketing productivity
in general, yet much evidence exists that firms interpret how
to calculate ROMI quite differently. When executives discuss
ROMI with different calculations of it in mind, only confusion
can result.

5. ROMI, by nature, ignores the effect of marketing assets of the
firm (e.g., its brands) and tends to lead managers toward a more
short-term decision perspective. That is, it typically considers only
short-term incremental profits and expenditures without looking at
longer-term effects or any change in brand equity.

6. And speaking of short-term versus long-term decisions, ROMI (like a
number of other metrics focused on snapshot information—in this
case, a particular marketing campaign) often can lead to actions by
management to shore up short-term performance to the detriment of
a firm’s sustainability commitment. Ethics in marketing should not be
an oxymoron—but often unethical behavior is driven by the demand
for quick, short-term marketing results.24

Apply the Metrics

1. Review the six objections to ROMI above and discuss them with your
classmates.

2. Select any two of the objections and develop a specific example of
how they might lead to a bad decision in market planning.

Metrics Moment

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that these four elements are the final items that an action plan documents. Sometimes
when we view a marketing plan in total, it can seem daunting and nearly impossible to ac-
tually implement. Like most big projects, implementation of a marketing plan is best done
one step at a time, paying attention to maximizing the quality of executing that step. In
practice, what happens is that marketers combine the input from these last four elements
of each action plan to form the overall implementation and control portion of the market-
ing plan. Let’s examine each element a bit further.

Assign Responsibility

A marketing plan can’t be implemented without people. And not everybody who will
be involved in implementing a marketing plan is a marketer. The truth is, marketing
plans touch most areas of an organization. Upper management and the human resources
department will need to deploy the necessary employees to accomplish the plan’s objec-
tives. You learned in Chapter 1 that marketing isn’t the responsibility only of a marketing
department. Nowhere is that idea more apparent than in marketing plan implementation.
Sales, production, quality control, shipping, customer service, finance, information tech-
nology—the list goes on—all will likely have a part in making the plan successful.

Create a Timeline

Notice that each action plan requires a timeline to accomplish the various tasks it requires.
This is essential to include in the overall marketing plan. Most marketing plans portray the
timing of tasks in flowchart form so that it is easy to visualize when the pieces of the plan
will come together. Marketers often use Gantt charts or PERT charts, popular in operations
management, to portray a plan’s timeline. These are the same types of tools that a gen-
eral contractor might use to map out the different elements of building a house from the
ground up. Ultimately, managers develop budgets and the financial management of the
marketing plan around the timeline so they know when cash outlays are required.

Set a Budget

Each element of the action plan links to a budget item, assuming there are costs involved in
carrying out the plan. Forecasting the needed expenditures related to a marketing plan is dif-
ficult, but one way to improve accuracy in the budgeting process overall is to ensure estimates
for expenditures for the individual action plans that are as accurate as possible. At the overall
marketing plan level, managers create a master budget and track it throughout the market
planning process. They report variances from the budget to the parties responsible for each
budget item. For example, a firm’s vice president of sales might receive a weekly or monthly
report that shows each sales area’s performance against its budget allocation. The vice presi-
dent would note patterns of budget overage and contact affected sales managers to determine
what, if any, action they need to take to get the budget back on track. The same approach
would be repeated across all the different functional areas of the firm on which the budget has
an impact. In such a manner, the budget itself becomes a critical element of control.

Decide on Measurements and Controls

Previously, we described the concept of control as a formal process of monitoring progress
to measure actual performance, compare the performance to the established marketing
objectives or strategies, and make adjustments to the objectives or strategies on the basis of
this analysis. The metric(s) a marketer uses to monitor and control individual action plans
ultimately forms the overall control process for the marketing plan. Metrics can serve as
leading indicators or lagging indicators of marketing outcomes. Leading indicators pro-
vide insight into the performance of current efforts in a way that allows a marketer to adjust
relevant marketing activities (hopefully) resulting in performance improvements against
the current action plan. Lagging indicators reflect the performance of an action plan based
on outcomes realized. Lagging indicators provide a basis for review and analysis of the

leading indicators
Performance indicators that provide insight into
the performance of current efforts in a way that
allows a marketer to adjust relevant marketing
activities (hopefully) resulting in performance
improvements against the current action plan.

lagging indicators
Performance indicators that provide insight into
the performance of an action plan based on
outcomes realized.

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action plan with implications for improvement that are focused beyond the scope of the
current action plan itself. That is, they provide post hoc insights for next actions.

It is an unfortunate fact that many marketers do not consistently do a good job of
measurement and control, which, of course, compromises their market planning. And
remember that selection of good metrics needs to take into account short-term objectives
balanced against the firm’s focus on long-term sustainability.

Operational Planning: Day-to-Day Execution
of Marketing Plans
Recall that planning happens at three levels: strategic, functional (such as market plan-
ning), and operational. In the previous section, we discussed market planning—the process
by which marketers perform a situation analysis, set marketing objectives, and develop,
implement, and control marketing strategies. But talk is cheap: The best plan ever written
is useless if it’s not properly carried out. That’s what operational plans are for. They put the
pedal to the metal by focusing on the day-to-day execution of the marketing plan.

The task of operational planning falls to first-line managers such as sales managers,
marketing communications managers, brand managers, and market research managers.
Operational plans generally cover a shorter period of time than either strategic plans or
marketing plans—perhaps only one or two months—and they include detailed directions
for the specific activities to be carried out, who will be responsible for them, and timelines
for accomplishing the tasks. In reality, the action plan template we provide in Table 3.1 is
most likely applied at the operational level.

Significantly, many of the important marketing metrics managers use to gauge the suc-
cess of plans actually get used at the operational planning level. For example, sales managers
in many firms are charged with the responsibility of tracking a wide range of metrics related
to the firm–customer relationship, such as number of new customers, sales calls per month,
customer turnover, and customer loyalty. The data are collected at the operational level and
then sent to upper management for use in planning at the functional level and above.

Make Your Life Easier! Use the Market Planning Template
Ultimately, the planning process we’ve described in this section is documented in a for-
mal, written marketing plan. You’ll find a template for building a marketing plan in the
Supplement at the end of this chapter. The template will come in handy as you make your
way through the book, as each chapter will give you information you can use to “fill in the
blanks” of a marketing plan. You will note that the template is cross-referenced with the
questions you must answer in each section of the plan. It also provides you with a general
road map of the topics covered in each chapter that need to flow into building the market-
ing plan. By the time you’re done, we hope that all these pieces will come together and
you’ll understand how real marketers make real choices.

As we noted previously, a marketing plan should provide the best possible guide for the
firm to successfully market its products. In large firms, top management often requires such a
written plan because putting the ideas on paper encourages marketing managers to formulate
concrete objectives and strategies. In small entrepreneurial firms, a well-thought-out marketing
plan is often the key to attracting investors who will help turn the firm’s dreams into reality.

operational plans
Plans that focus on the day-to-day execution of
the marketing plan. Operational plans include
detailed directions for the specific activities to
be carried out, who will be responsible for them,
and time lines to accomplish the tasks.

MyMarketingLab™
Go to mymktlab.com to complete the problems marked with this icon
as well as additional Marketing Metrics questions only available in
MyMarketingLab.

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Objective Summary Key Terms Apply
CHAPTER 3

Study Map

3.1 Objective Summary (pp. 68–70)
Explain business planning and its three levels.
Business planning is the ongoing process of decision making
that guides the firm in both the short term and the long term.
A business plan, which includes the decisions that guide the
entire organization or its business units, is different from a
marketing plan, which is a process and resulting document
that describes the marketing environment, outlines the mar-
keting objectives and strategies, and identifies how the com-
pany will implement and control the strategies embedded in
the plan.

Planning takes place at three key levels. Strategic plan-
ning is the managerial decision process that matches the
firm’s resources and capabilities to its market opportunities
for long-term growth. Large firms may have a number of self-
contained divisions called strategic business units (SBUs). In
such cases, strategic planning takes place at both the overall
corporate level and within the SBU. Functional planning gets
its name because the various functional areas of the firm, such
as marketing, finance, and human resources, get involved.
And operational planning focuses on the day-to-day execution
of the functional plans and includes detailed annual, semian-
nual, or quarterly plans.

Key Terms
business planning, p. 69

business plan, p. 69

marketing plan, p. 69

strategic planning, p. 70

strategic business units (SBUs), p. 70

functional planning, p. 70

market planning, p. 70

operational planning, p. 70

3.2 Objective Summary (pp. 71–77)
Describe the steps in strategic planning.
For large firms that have a number of self-contained business
units, the first step in strategic planning is for top manage-
ment to establish a mission for the entire corporation. Top
managers then evaluate the internal and external environment
of the business and set corporate-level objectives that guide
decision making within each individual SBU. In small firms that
are not large enough to have separate SBUs, strategic plan-
ning simply takes place at the overall firm level.

The first step in strategic planning is defining the
mission—a formal document that describes the organization’s

overall purpose and what it hopes to achieve in terms of its
customers, products, and resources. Step 2 is to evaluate the
internal and external environment through a process known as
situational analysis, which is later formatted as a SWOT analy-
sis that identifies the organization’s strengths, weaknesses, op-
portunities, and threats. Step 3 is to set organizational or SBU
objectives that are specific, measurable, attainable, and sus-
tainable. Step 4 is to establish the business portfolio, which is
the range of different businesses that a large firm operates. To
determine how best to allocate resources to the various busi-
nesses, or units, managers use the Boston Consulting Group
(BCG) growth–market share matrix to classify SBUs as stars,
cash cows, question marks, or dogs. The final step, Step 5, in
strategic planning is to develop growth strategies. Marketers
use the product–market growth matrix to analyze four fun-
damental marketing strategies: market penetration, market
development, product development, and diversification.

Key Terms
mission statement, p. 71

situation analysis, p. 71

internal environment, p. 71

external environment, p. 72

SWOT analysis, p. 72

business portfolio, p. 73

portfolio analysis, p. 73

BCG growth–market share matrix, p. 73

stars, p. 74

cash cows, p. 74

question marks, p. 74

dogs, p. 75

market penetration strategies, p. 75

market development strategies, p. 76

product development strategies, p. 76

diversification strategies, p. 76

3.3 Objective Summary (pp. 77–84)
Describe the steps in market planning.
Once big-picture issues are considered, it’s up to the lower-level
functional-area managers, such as the marketing manager,
production manager, and finance manager, to develop the
functional marketing plans—the nuts and bolts—to achieve
organizational and SBU objectives. The steps in this market
planning process are quite similar to the steps at the strategic
planning level. An important distinction between strategic I

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cover a shorter period of time and include detailed directions
for the specific activities to be carried out, who will be respon-
sible for them, and time lines for accomplishing the tasks.
To ensure effective implementation, a marketing plan must
include individual action plans, or programs, that support the
plan at the operational level. Each action plan necessitates
providing a budget estimate, schedule, or time line for its
implementation and appropriate metrics so that the marketer
can monitor progress and control for discrepancies or varia-
tion from the plan. Sometimes, variance from a plan requires
shifting or increasing resources to make the plan work; other
times, it requires changing the objectives of the plan to recog-
nize changing conditions.

Key Terms
control, p. 80

activity metric, p. 80

outcome metric, p. 80

return on marketing investment (ROMI), p. 81

action plans, p. 81

leading indicator, p. 83

lagging indicator, p. 83

operational plans, p. 84

planning and market planning, however, is that marketing
professionals focus much of their planning efforts on issues
related to the Four Ps of the marketing mix. Managers start
off by performing a situational analysis of the marketing envi-
ronment. Next, they develop marketing objectives specific to
the firm’s brand, sizes, and product features. Then marketing
managers select the target market(s) for the organization and
decide what marketing mix strategies they will use. Product
strategies include decisions about products and product char-
acteristics that will appeal to the target market. Pricing strate-
gies state the specific prices to be charged to channel members
and final consumers. Promotion strategies include plans for
advertising, sales promotion, public relations, publicity, per-
sonal selling, and direct marketing used to reach the target
market. Distribution (place) strategies outline how the product
will be made available to targeted customers when and where
they want it. Once the marketing strategies are developed,
they must be implemented, which is the last step in develop-
ing the marketing plan. Control is the measurement of ac-
tual performance and comparison with planned performance.
Maintaining control implies the need for concrete measures of
marketing performance called “marketing metrics.”

Operational planning is done by first-line supervisors such
as sales managers, marketing communication managers, and
market research managers and focuses on the day-to-day
execution of the marketing plan. Operational plans generally

Chapter Questions and Activities

Concepts: Test Your Knowledge

3-1. What is a marketing plan, and how does it differ from
a business plan?

3-2. Describe the three levels of business planning: strate-
gic, functional, and operational planning.

3-3. What is a mission statement? What is a SWOT
analysis? What role do these play in the planning
process?

3-4. What is a strategic business unit (SBU)? How does
strategic planning differ at the corporate and the SBU
levels?

3-5. Describe the five steps in the strategic planning pro-
cess.

3-6. How do firms use the BCG model for portfolio analysis
in planning for their SBUs?

3-7. Describe the four business growth strategies: market
penetration, product development, market develop-
ment, and diversification.

3-8. Explain the four steps in the market planning process.
3-9. What is return on marketing investment (ROMI)? How

does considering marketing as an investment instead
of an expense affect a firm?

3-10. Give several examples of marketing metrics. How
might a marketer use each metric to track progress of
some important element of a marketing plan?

3-11. What is an action plan? Why are action plans such an
important part of market planning? Why is it so impor-
tant for marketers to break the implementation of a
marketing plan down into individual elements through
action plans?

3-12. How does operational planning support the marketing
plan?

Activities: Apply What You’ve Learned

3-13. Creative Homework/Short Project As a marketing stu-
dent, you know that large firms often organize their
operations into a number of strategic business units
(SBUs). A university might develop a similar structure in
which different academic schools or departments are
seen as separate businesses. Consider how your uni-
versity or college might divide its total academic units
into separate SBUs. What would be the problems with
implementing such a plan? What would be the advan-
tages and disadvantages for students and for faculty?
Be prepared to share your analysis of university SBUs to
your class.

3-14. Creative Homework/Short Project Pick a firm of your
choice that operates on a global level for which you
have interest in its products or services. Use the matrix

MyMarketingLab™
Go to mymktlab.com to watch this
chapter’s Rising Star video(s) for career advice
and to respond to questions.

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ber-one market share in global PC sales with about 21 percent,
topping HP with about 19 percent. Ranked third through fifth
are Dell, Apple, and Acer, respectively.25 But, despite its com-
mon appearance in marketing objectives, market share has
been heavily criticized as a metric. Often it can become more
of a “bragging right” for a firm than a profit enhancer. This is
because—especially in situations like the global PC market that
is seeing heavy annual declines in sales as tablets and other
devices replace PCs—investing in being number one in market
share may deflect focus away from more lucrative new and
growing product lines.

3-19. Under what conditions do you believe market share as
a metric is important to a firm? What are the potential
pitfalls of relying too much on market share as a key
metric? What self-defeating behaviors might this over-
reliance lead a firm to undertake?

3-20. Come up with some other product categories besides
PCs that are declining and identify the firms within
those categories that have the highest market share.
What does their profit picture look like?

Choices: What Do You Think?

3-21. Defining the mission is identified as the first major step
in the strategic planning process. Many companies
display their mission statement on their website, mak-
ing it readily accessible to the public. Do you think a
company should make it available for everyone to see?
Why or why not? Are there any specific situations or
factors to consider that would lead you to recommend
not doing so?

3-22. The Boston Consulting Group (BCG) growth–market
share matrix identifies SBUs and their related products
as stars, cash cows, question marks, and dogs. Do you
think this is a useful way for organizations to examine
their businesses? What are some examples of product
lines that fit in each category?

3-23. Within the BCG matrix, products that earn the dog
label have limited market potential for the firm and
also only hold a small relative market share. Products
identified as dogs within this framework are typically
obvious candidates for divestment, but are there any
cases where doing so would not be wise for an orga-
nization? That is, why would a firm want to hold onto
a dog?

3-24. In this chapter, we talked about how firms do strategic,
functional, and operational planning. Yet some firms
seem to be successful without formal planning. Do
you think planning is essential to a firm’s success? How
might planning hurt an organization? Under what cir-
cumstances do you believe that formal planning is and
is not important to an organiza

tion?

3-25. Most planning involves strategies for growth. But
is growth always the right direction to pursue? Can
you think of some organizations that should have
contraction rather than expansion as their objective?
Do you know of any organizations that have actually
planned to get smaller rather than larger to increase
their success?

provided in Figure 3.4 in the textbook and accompany-
ing discussion to identify an example of a strategy that
the company offers or has offered that fits within each
of the cells (Market Penetration, Market Development,
Product Development, Diversification). Provide your
rationale/justification for placing it in that particular
category of strategy.

3-15. Creative Homework/Short Project Pick your favorite
restaurant. Identify two or three activity metrics and
two or three outcome metrics that you believe the
restaurant could use to better monitor and control its
performance in the area of service. Explain why you
believe each metric selected is well suited for evalu-
ating service performance (including why it is well
suited to serve as an activity metric as opposed to
an outcome metric in this context). Identify as well
which of these metrics would most likely be easier to
track, and why.

3-16. In Class, 10–25 Minutes for Teams As an employee of
a business consulting firm that specializes in helping
people who want to start small businesses, you have
been assigned a client who is interested in introduc-
ing a new concept in health clubs—one that offers its
customers both the usual exercise and weight-training
opportunities and certain related types of medical
assistance, such as physical therapy, a weight-loss phy-
sician, and basic diagnostic testing. As you begin think-
ing about the potential for success for this client, you
realize that developing a marketing plan is going to be
essential. Take a role-playing approach to present your
argument to the client as to why he or she needs to
spend the money on your services to create a formal
marketing plan.

3-17. For Further Research (Individual) All businesses—
big and small—need to plan if they want to be
profitable and sustainable. Contact one of your fa-
vorite local businesses and make an appointment
with someone who has a hand in developing the
firm’s business plan. Find out how much time the
planning process takes, how often the business
plan is updated, and what types of information the
business plan contains. Summarize your findings in
a short report.

3-18. For Further Research (Groups) Identify a large compa-
ny, like Disney, that has several SBUs. Using the BCG
model, assign at least one SBU to each category in the
model: star, cash cow, question mark, and dog. Include
at least two pieces of data for each to justify your cat-
egorization. Prepare a short presentation to share with
your class.

Concepts: Apply Marketing Metrics

You learned in the chapter that most marketers today feel
pressure to measure (quantify) their level of success in market
planning. They do this by setting and then measuring market-
ing objectives. One popular metric is market share, which in
essence represents the percentage of total product category
sales your products represent versus category competitors. For
example, recent statistics indicate that Lenovo holds the num-

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Miniproject: Learn by Doing

The purpose of this miniproject is to gain an understanding of
market planning through actual experience.

3-29. a. Select one of the following for your market plan-
ning project:
�� Yourself (in your search for a career)
�� Your university
�� A specific department in your university

b. Next, develop the following elements of the market
planning process:
�� A mission statement
�� A SWOT analysis
�� Objectives
�� A description of the target market(s)
�� A positioning strategy
�� A brief outline of the marketing mix strategies—

the product, pricing, distribution, and promotion
strategies—that satisfy the objectives and address
the target market

c. Prepare a brief outline of a marketing plan using the
basic template provided in this chapter as a guide.

3-26. When most people think of successful marketing, in-
ternal firm culture doesn’t immediately come to mind
as a contributing factor. You may have learned about
corporate culture in a management course. What is
a corporate culture? What are some reasons a firm’s
culture is important to the capability of doing good
marketing? Give some examples of aspects that
you consider indicate a good corporate culture for
marketing.

3-27. Many companies operate on the mentality that “mar-
keting is an expense.” Do you agree that marketing
is an expense, or should marketing be treated as an
investment? Should there be a business standard as
to whether marketing is treated as an expense/invest-
ment, or should individual organizations be given the
freedom to choose which line item to assign it to? Ex-
plain your reasoning.

3-28. A common saying among managers is “if we can’t
measure it, we can’t manage it.” Is there such a thing
as an overreliance on marketing metrics? Are there
cases or specific aspects of marketing where a single-
minded focus on metrics is inappropriate or detrimental
to the firm?

In addition, periodically on select items sold by Amazon offers
0 percent APR financing with 12 equal monthly payments. One
of the key benefits to Amazon is that compared to the use of
traditional cards like Visa, MasterCard, or AmEx, transaction
processing costs for its Prime Store Card are lower.

One of the best benefits that brick-and-mortar retail
stores have maintained over online retailers is the ability to
provide customers with instant gratification. Amazon aims
to decrease that advantage through its services. Recently
introduced in select cities is Prime Now. a service that allows
customers to receive their order within one hour for a fee of
$7.99, or within two hours for no additional fee. Currently,
the products available for Prime Now delivery are limited to
15,000 to 40,000 available items, which may seem like a lot
but Prime members currently have access to millions of items
to select from for two-day shipping. Prime Now is definitely an
innovative service, but in some markets it is faced with other
competitors for on-demand delivery offerings, like Google
Express and UberRush.

Amazon continues to establish more services under the
Prime umbrella. Prime Pantry is an option by which members
can fill a virtual box with groceries and household products
and have them delivered for $5.99 per box. Prime Music offers
ad-free access to playlists and a catalog of more than1 mil-
lion songs and albums. Prime Photo provides unlimited photo
storage on the Amazon Cloud. This wide variety of associated
services draws the attention of numerous varied competitors,
and the key question as Amazon move forward is: How will
the company successfully manage such a large portfolio of of-
ferings? For success to be sustained over time, Amazon must
carefully consider what long-term strategies are necessary to
continue to make Amazon Prime a profitable winner in a com-
petitive marketplace.

In marketing, yesterday’s success quickly becomes old news.
How should one of the world’s largest retailers plan to build on
its’ previous achievements? In the retail marketplace, it is be-
coming harder for companies to differentiate themselves from
the competition beyond simply price. Amazon is now faced
with this challenge and must develop offerings to protect and
grow its customer base. One of its primary offerings to meet
this task has been the creation of Amazon Prime. The service
was created in 2005 offering free two-day shipping within the
U.S. on qualified purchases. The initial annual membership fee
was $79 and also allowed discounted one-day shipping rates
on those same purchases. In 2014, the fee was increase to $99
and more services were added to increase customer value.

Prime Instant Video allows customers to stream movies
and TV shows to their web browsers or multiple Amazon video-
compatible devices. The current library of tens of thousands of
titles provides a wide array of choice to lure potential custom-
ers. Subscribers can also purchase online video subscriptions
from premium content providers like Showtime, Starz, and
other streaming entertainment channels. The objective of the
add-on services is to attract new customers to Amazon Prime in
a crowded competitive environment. As of 2016, Netflix is the
world’s largest provider of streaming video content with more
than 75 million subscribers. In addition, Hulu is a joint venture
of Walt Disney, 21st Century Fox, and Comcast’s NBCUniversal
that similarly provides streaming services.

One of Amazon’s latest additions to its Prime service is the
�=+]��@�%=��!=’*� /��!=’�=�\!='”�”Z~”�=+~�=”�\+�/��=��#��
cash back on all Amazon purchases. Or, in lieu of the 5 percent
cash back, members can choose a tiered financing option for
purchases more than $149. In this plan, when customers reach
cost thresholds they can avoid paying interest if the outstand-
ing balance is paid within 6, 12, or 24 months, as applicable.

Marketing in Action Case Real Choices at Amazon

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3-33. What decision(s) do you recommend?
3-34. What are some ways to implement your recommendation?

Based on: Tricia Duryee, “Future-Proofing Prime: Amazon’s Plans Go Way Beyond Free Shipping,” GeekWire.com, (April 26, 2014), http://
www.geekwire.com/2014/future-proofing-prime-amazons-ambitious-plans-go-way-beyond-shipping/ (accessed April 5, 2016); Amazon.com,
“About Amazon Prime,” https://www.amazon.com/gp/help/customer/display.html/ref=hp_468520_norush?nodeId =20044 4160 (accessed
April 5, 2016); Taylor Tepper, “Should You Get the Amazon Prime Store Card?” Time.com, July 24, 2015, http://time.com/money/3970639/
amazon-prime-store-credit-card/ (accessed April 5, 2016); Jason Del Rey, “Prime Now Has Become Amazon’s Biggest Retail Bet,” Re/code.
net, December 14, 2015, http://recode.net/2015/12/14/prime-now-has-become-amazons-biggest-retail-bet/ (accessed April 5, 2016).

You Make the Call
3-30. What is the decision facing Amazon?
3-31. What factors are important in understanding this deci-

sion situation?
3-32. What are the alternatives?

3-35. Creative Homework/Short Project. Assume that you are the marketing director
for Mattel Toys. Your boss, the company vice president for marketing, has
decided that it’s time to develop some new objectives for some of their
product lines as the company begins market planning. Your VP has asked
you to help out by writing several initial objectives. Select any product line
at Mattel and develop several objectives that fulfill the criteria for objectives
discussed in the chapter.

3-36. Creative Homework/Short Project. An important part of planning is a
SWOT analysis, understanding an organization’s strengths, weaknesses,
opportunities, and threats. Prepare a SWOT analysis for Panera Bread that
includes three or four items in each of the four SWOT categories.

MyMarketingLab™

Go to mymktlab.com for Auto-graded writing questions as well as the following
Assisted-graded writing questions:

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build a

HOW TO USE This Template

Here’s a handy template that serves as a road map
both to develop a marketing plan and to guide
you through the course.

1. The first column provides the basic marketing
plan OUTLINE.

2. The second column gives you QUESTIONS
you must answer in each of the sections of
the marketing plan.

3. The third column shows you where to go to
find the answers as you work your way
through the CHAPTERS of the book.

By the time you’re done, all these pieces will come together
and you’ll understand how real marketers make real
choices.

Marketing
P lan

OUTL INE
C . DEVELOP MARKETING S TR ATE GIE S

3. Pricing Strategies

QUE S TION

C HAP TE R

How will we price our product to the consumer and
through the channel?

Chapter 10: Price: What is the Value Proposition Worth?

The Marketing Plan OUTLINE

A. PERFORM A SITUATION ANALYSIS
1. Internal Environment

2. External Environment

3. SWOT Analysis

B. SET MARKETING OBJECTIVES

C. DEVELOP MARKETING STRATEGIES
1. Select Target Markets and Positioning

2. Product Strategies

3. Pricing Strategies

4. Distribution Strategies

5. Promotional Strategies

D. IMPLEMENT AND CONTROL THE
MARKETING PLAN
1. Action Plans (for all marketing mix elements)

2. Responsibility

3. Timeline

4. Budget

5. Measurement and Control

Chapter 3 Supplement
IS

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C H A P T E R 3 | S T R AT E G I C M A R K E T P L A N N I N G 91

QUESTIONS the Plan Addresses CHAPTERS Where You’ll Find These Questions
�� How does marketing support my company’s mission, objectives, and

growth strategies?
�� What is the corporate culture and how does it influence marketing

activities?
�� What has my company done in the past with its: Target markets?

Products? Pricing? Promotion? Supply chain?
�� What resources including management expertise does my company

have that make us unique? How has the company added value
through its offerings in the past?

Chapter 1: Welcome to the World of Marketing: Create
!#’��?+��=� !?Z�

Chapter 2: Global, Ethical, and Sustainable Marketing

Chapter 3: Strategic Market Planning

Chapter 4: Market Research

Chapter 5: Marketing Analytics: Welcome to the Era
of Big Data

�� What is the nature of the overall domestic and global market for our
product? How big is the market? Who buys our product?

�� Who are our competitors? What are their marketing strategies?
�� What are the key trends in the economic environment? The

technological environment? The regulatory environment? The social
and cultural environment?

�� Based on this analysis of the internal and external environments, what
are the key Strengths, Weaknesses, Opportunities, and Threats (SWOT)?

�� What does marketing need to accomplish to support the objectives
of my firm?

Chapter 2: Global, Ethical, and Sustainable Marketing

Chapter 3: Strategic Market Planning

�� How do consumers and organizations go about buying, using, and
disposing of our products?

�� Which segments should we select to target? If a consumer market: What
are the relevant demographic, psychographic, and behavioral segmenta-
tion approaches and the media habits of the targeted segments? If a
business market: What are the relevant organizational demographics?

�� How will we position our product for our market(s)?

Chapter 4: Market Research

Chapter 5: Marketing Analytics: Welcome to the Era of Big Data!

Chapter 6: Understand Consumer and Business Markets

Chapter 7: Segmentation, Target Marketing, and Positioning

�� What is our core product? Actual product? Augmented product?
�� What product line/product mix strategies should we use?
�� How should we package, brand, and label our product?
�� How can attention to service quality enhance our success?

Chapter 8: Product I: Innovation and New Product
Development

Chapter 9: Product II: Product Strategy, Branding,
and Product Management

�� How will we price our product to the consumer and through the
channel? How much must we sell to break even at this price? What
pricing tactics should we use?

Chapter 10: Price: What Is the Value Proposition Worth?

�� How do we get our product to consumers in the best and most
efficient manner?

�� How do we integrate supply chain elements to maximize the value we
offer to our customers and other stakeholders?

�� What types of retailers, if any, should we work with to sell our product?

Chapter 11: Deliver the Goods: Determine the Distribution
Strategy

Chapter 12: Deliver the Customer Experience: Goods and
Services via Bricks and Clicks

�� How do we develop a consistent message about our product? How
do we best generate buzz?

�� What approaches to Advertising, Sales Promotion, Social Media,
Direct/Database Marketing, Personal Selling, and Public Relations
should we use?

�� What role should a sales force play in the marketing communications
plan? How should direct marketing be used?

Chapter 13: Promotion I: Advertising and Sales Promotion

Chapter 14: Promotion II: Social Media Marketing, Direct/
Database Marketing, Personal Selling, and
Public Relations

�� How do we make our marketing plan happen? Chapter 3: Strategic Market Planning

Chapter 4: Market Research

Chapter 5: Marketing Analytics: Welcome to the Era
of Big Data!

�� Who is responsible for accomplishing each aspect of implementing
the marketing plan?

�� What is the timing for the elements of our marketing plan?

�� What budget do we need to accomplish our marketing objectives?

�� How do we measure the actual performance of our marketing plan
and compare it to our planned performance and progress toward
reaching our marketing objectives?

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202

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Meet Jen Sey
A Decision Maker at Levi Strauss

Jen Sey is Chief Marketing Officer for the Levi’s® Brand within Levi Strauss & Co. She has been with LS&Co. for
more than 16 years, holding a variety of leadership positions within the Marketing, Strategy, and E-commerce

teams. In 2013, Sey became the Global Chief Marketing Officer for the Levi’s® Brand.
Twenty years ago, she began her career at an advertising agency, Foote Cone and Belding, where she

worked on a variety of brands including Levi’s®. She went on to become the advertising manager at Banana
Republic before landing at Levi Strauss & Co in 1999.

At LS&Co she has held a broad range of assignments across both Levi’s® and Dockers brands includ-
ing Director of Marketing for U.S. Levi’s®, Senior Director of Global Strategy for Levi’s®, Vice President of
Global Marketing for Levi Strauss & Co., and Senior Vice President for Dockers Global Marketing. In 2012,
she stepped into the role of Senior Vice President of Global E-commerce, driving the business and replat-
forming efforts for both levi.com and dockers.com across the regions.

In 2013, Jen returned to the Levi’s® Brand as CMO and quickly launched the Live in Levi’s® campaign,
notable for reconnecting the brand with its optimistic spirit that fans around the world have loved about Levi’s® for decades. The campaign is a
celebration of Levi’s® products and brand, showcasing how people all over the world live in Levi’s®. The Live in Levi’s “Beautiful Morning” televi-
sion spot was honored as a 2015 Taste Award’s Special Achievement Spotlight winner, recognizing Jen’s immediate impact.

Sey has received numerous awards, including the distinction of AdAge’s Top 40 Marketers Under 40 in 2006; being named one of the Top
Women in Retail by Total Retail in 2014 and one of Brand Innovators’ Top 50 Women in Marketing in 2015. Most recently, she was named one
of Hot Topic’s Top 100 Retail Marketers in 2016.

As a child, Sey led an intense life of dedication, challenge, and competition. She won the U.S. National Gymnastics Championship title in
1986, less than one year after having suffered a devastating injury at the 1985 World Championships. As a result, the U.S. Olympic Committee
named her Gymnastics’ Athlete of the Year. She retired after eight years on the national team and went on to study at Stanford University where
she double majored in Communications and Political Science. In 2008, Sey released her first book, Chalked Up, a memoir detailing her triumphs
and struggles within the world of competitive gymnastics. She has been featured on a variety of talk shows including Good Morning America and
the CBS Morning Show discussing the pros and cons of elite competitive childhood athletics.

Sey now lives in San Francisco, California, with partner Daniel and her three sons Virgil, Wyatt, and Oscar. She lends her voice to online
outlets Salon.com, Mommytrackd.com and BasilandSpice.com, and she continues her work started with Chalked Up as an athlete advocate. In
2016, Sweaty Betty (leading British activewear brand) appointed Sey to the Company’s Board of Directors.

7.1 Identify the steps in the target
marketing process.
p. 204

TARGET MARKETING: SELECT AND
ENTER A MARKET p. 204

7.2 Understand the need for
market segmentation and the

approaches available to do it.
pp. 205–217

STEP 1: SEGMENTATION p. 205

7.3 Explain how marketers evalu-
ate segments and choose a
targeting strategy. pp. 217–220

STEP 2: TARGETING p. 217

7.4 Recognize how marketers
develop and implement
a positioning strategy.
pp. 221–225

STEP 3: POSITIONING p. 221

Check out the Chapter 7 Study Map
on page 226.

Segmentation, Target
Marketing, and Positioning

Chapter 7

Jen
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Je
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’s
In

fo What I do when I’m not working:Spend time with my family (3 kids, 1 part-
ner, 1 dog), read, cook, write, exercise

First job out of school:
Production assistant on a movie and
gymnastics coach

Career high:
Levi’s CMO—launch of Live in Levi’s and
Levi’s Stadium

A job-related mistake I wish I hadn’t
made:
Got too attached to a single path forward
in my career. Wish I’d been open to unex-
pected next steps sooner rather than later.

My motto to live by:
Get ’er done

My management style:
Be open and honest, practice humility
always, roll up your sleeves and do the
work, be direct in your communication
style, and always remember—you don’t
know everything!

My pet peeve:
Leaders that think leadership is just telling
people what to do. And mean people. No
patience for meanness. Unnecessary.

Here’s my problem…

The Levi’s brand was losing relevance and market share.
Although technically we were the leader in denim in

terms of market share, it didn’t necessarily feel like we were leading; our mar-
ket share was being eaten up by premium brands and then most recently fast
fashion. We needed to reposition for success—in terms of both financial and
equity performance and the overall future health of the brand. We needed to
create a clear brand value proposition that was relevant and differentiated,
broadly appealing and globally viable. My job was to lead this process and cre-
ate a long-standing marketing campaign off of this positioning, while inspiring
the organization more broadly with this brand direction.

Jen considered her Options 1 � 2 � 3

Option

First and foremost we looked at the obvious: Levi’s is THE
original blue jean. Our founder Levi Strauss and tailor Jacob
Davis obtained a U.S. patent on the process of putting rivets in
men’s work pants in 1873, and the company has a rich history
that spans almost 150 years. This positioning asserts the brand’s

innovator status; it’s the oldest but also the first. No other company can make
this claim. No one else created the blue jean—or the product category.
Although this is a powerful statement it’s not that relevant to modern consum-
ers. It doesn’t give them a reason to choose the brand TODAY. We know that
millennials value authenticity, but we need to either promote this attribute
more forcefully or give them additional reasons to choose our brand.

Option

We also looked at a different definition of Originality. Our idea is
that “originality” means not only “first.” This concept also refers to
the quality of being new, fresh, creative, and independent. We
looked at creating an association between the brand and the wear-
er with a position built around the idea that Levi’s is as origi-

nal as you are. This statement is relevant and aspirational. Everyone wants to
see themselves as original, unique, and individualistic. And it is certainly believ-
able for Levi’s to be associated with this position. The brand has long told a story
about individuality, most notably through its strong association with the cultural

icon James Dean. The actor’s appearance in the 1950s movie Rebel Without a
Cause wearing a white shirt, leather jacket, and a pair of Levi’s 501s is one of the
most legendary images in pop culture. On the other hand, this link with original-
ity no longer makes the statement it used to. Many jeans and apparel brands
make this claim (justified or not). We couldn’t be sure that this position would
differentiate us in the market and give people a reason to choose Levi’s versus
another brand. However, there is no question that our brand has a legitimate
claim to this space if we choose to remind consumers of our long heritage.

Option

As we embarked on research with consumers around the world,
we heard a lot of people telling us about all the amazing life expe-
riences they have had in their Levi’s. They related stories about
road trips, first loves, concerts, and all-night dance parties. They
talked about the bond they have with their Levi’s because of these

experiences. And they said that they did not have this kind of relationship with
their other jeans or clothing items. The relationship with their Levi’s jeans was
special. This inspired this idea of: You wear other jeans but you live
your life in Levi’s. This claim is highly differentiated and more importantly
it makes an emotional connection with our customers. The down side is that
today blue jeans are more of a fashion-oriented product than they used to be.
We need to be able to drive a style message in addition to an emotional mes-
sage. And this connection isn’t as strong in all of our global markets. For ex-
ample, in China, where people haven’t been wearing Levi’s for very long, people
haven’t had time to forge these connections yet.

Now, put yourself in Jen’s shoes. Which option would you choose, and
why?

Real People, Real Choices

See what Option Jen chose in MyMarketingLab™

You Choose
Which Option would you choose, and why?
Option 1 Option 2 Option 3
Improve Your Grade!
Over 10 million students improved their results using the Pearson MyLabs.
Visit mymktlab.com for simulations, tutorials, and end-of-chapter problems.
MyMarketingLab™
IS
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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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Target Marketing:
Select and Enter a Market
Way back in Chapter 1, we defined a market as all the customers and
potential customers who share a common need that can be satisfied
by a specific product, who have the resources to exchange for it, who
are willing to make the exchange, and who have the authority to make
the exchange. And at this point in your study of marketing, you know
that key goals of the marketer are to create value, build customer rela-

tionships, and satisfy needs. But in our modern, complex society, it’s naive to assume that
everyone’s needs are the same—even for a pair of blue jeans.

Today, it’s a complex task to understand people’s differing needs because techno-
logical and cultural advances create a condition of market fragmentation. This means that
people’s diverse interests and backgrounds naturally divide them into numerous groups
with distinct needs and wants. Because of this diversity, the same good or service will not
appeal to everyone.

Consider, for example, the effects of fragmentation in higher education. Before you
faced the big decision of which classes to register for, including this one, you had the
even bigger task of deciding on which one of the numerous types of colleges or univer-
sities you would attend. Not only did you have the more traditional schools to choose
from—community or technical colleges and public or private four-year schools—but
you also had newer schools, such as the for-profit University of Phoenix or Kaplan
University, and several online-only schools, such as Western Governors University. Each
of these institutions of higher learning serves a different market need, and what may
meet your needs currently might not meet your needs in the future. Fortunately, there are
plenty of options to choose from, depending on your abilities, background, and of course
the old checkbook!

Marketers must balance the efficiency of mass marketing where they serve the same
items to everyone, with the effectiveness that comes when they offer each individual
exactly what he or she wants. Mass marketing certainly costs much less—when we of-
fer one product to everyone, we eliminate the need for separate advertising campaigns
and distinctive packages for each item. However, consumers see things differently. From
their perspective the best strategy would be to offer the perfect product just for them.
Unfortunately, that’s often not realistic.

For 40 years, Burger King’s motto was “Have It Your Way,” but in 2014 the fast
food company scrapped that iconic theme for an updated version of the slogan: “Be
Your Way.” Burger King says that the new motto is intended to remind people that
“they can and should live how they want anytime. It’s ok to not be perfect … Self-
expression is most important and it’s our differences that make us individuals instead
of robots.”1 This change is convenient for Burger King, because the huge chain could
deliver on the old promise only to a point: “Having” it your way is fine as long as you
stay within the confines of familiar condiments, such as mustard or ketchup. Don’t
dream of topping your burger with blue cheese, mango sauce, or some other “exotic”
ingredient.

So, instead of trying to sell the same thing to everyone, marketers select a target mar-
keting strategy in which they divide the total market into different segments based on cus-
tomer characteristics, select one or more segments, and develop products to meet the needs
of those specific segments. Figure 7.1 illustrates the three-step process of segmentation,
targeting, and positioning, and it’s what we’re going to check out in this chapter. Let’s start
with the first step—segmentation.

market fragmentation
The creation of many consumer groups due to a
diversity of distinct needs and wants in modern
society.

target marketing strategy
Dividing the total market into different segments
on the basis of customer characteristics,
selecting one or more segments, and developing
products to meet the needs of those specific
segments.

7.1
OBJECTIVE
Identify the steps in
the target marketing
process.

(p. 204)

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Copyright © 2018 by Pearson Education, Inc.
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1. Segmentation
Identify and
describe
market
segments

2. Targeting
Evaluate
segments and
decide which
to go after

3. Positioning
Develop a marketing
mix that will create
a competitive advantage
in the minds of the
selected target market

Figure 7.1 Process | Steps in the
Target Marketing Process

Target marketing strategy consists of three
separate steps. Marketers first divide the
market into segments based on customer
characteristics, then select one or more
segments, and finally develop products to
meet the needs of those specific segments.Step 1: Segmentation

Segmentation is the process of dividing a larger market into smaller
pieces based on one or more meaningful, shared characteristics. This
process is a way of life for almost all marketers in both consumer and
business-to-business markets. The truth is that you can’t please all
the people all the time, so you need to take your best shot. Marriott,
for example, segments its market by offering 16 separate brands that
range from the value-oriented Courtyard to the deluxe Ritz-Carlton.
Newer brands include the Moxy chain in partnership with IKEA
and the uber-hip Edition hotels it is opening in partnership with Ian

Schrager who created the boutique hotel concept in the 1980s and is most famous for
his Studio 54 disco.2 Just how do marketers segment a population? How do they divide
the whole pie into smaller slices they can “digest”? The marketer must decide on one or
more useful segmentation variables—that is, dimensions that divide the total market
into fairly homogeneous groups, each with different needs and preferences. In this sec-
tion, we’ll take a look at this process, beginning with the types of segmentation variables
that marketers use to divide up end-user consumers. Then we’ll move on to business-to-
business segmentation.

Segment Consumer Markets
At one time, it was sufficient to divide the sports shoe market into athletes and non-ath-
letes. But take a walk through any sporting goods store today and you’ll quickly see that
the athlete market has fragmented in many directions. Shoes designed for jogging, bas-
ketball, tennis, cycling, cross training, and even skateboarding beckon us from the aisles.
We need several segmentation variables if we want to slice up the market for all the shoe
variations available today. First, not everyone is willing or able to drop several hundred
bucks on the latest sneakers, so marketers consider income (Note: A pair of Air Jordan
Friends and Family edition kicks will run you a cool $6,000).3 Second, men may be more
interested in basketball shoes for shooting hoops with the guys, whereas women snap up
the latest Pilates styles, so marketers also consider gender. Because not all age groups are
equally interested in buying specialized athletic shoes, we slice the larger consumer “pie”
into smaller pieces in a number of ways, including demographic, psychographic, and

segmentation
The process of dividing a larger market
into smaller pieces based on one or more
meaningfully shared characteristics.

segmentation variables
Dimensions that divide the total market into
fairly homogeneous groups, each with different
needs and preferences.

7.2
OBJECTIVE
Understand the
need for market
segmentation and the
approaches available
to do it.

(pp. 205–217)

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behavioral differences. In the case of demographic
segmentation, there are several key subcategories of
demographics: age (including generational differ-
ences), gender, family life cycle, income and social
class, ethnicity, and place of residence, sometimes
referred to separately as geographic segmentation.

Figure 7.2 summarizes the dominant approaches
to segmenting consumer markets.

In the sections that follow, we’ll consider each
of these segmentation approaches in turn, but first a
note of caution. When it comes to marketing to some
groups—in particular, lower-income individuals, the
poorly educated, nonnative-language speakers, and
children—it is incumbent on marketers to exercise
the utmost care not to take undue advantage of their
circumstances. In Chapter 2, we introduced a global
segment called the bottom of the pyramid (BOP), which
is the collective name for the group of more than 4
billion consumers throughout the world who live on
less than $2 a day. Ethical marketers must be sensi-

tive to the different conditions in which people find themselves, and proactively work to
uphold a high level of honesty and trust with all segments of the public. Doing so is noth-
ing short of marketing’s social responsibility.

One other caveat is needed before we jump into our discussion of different market
segments. Identifying segments is not, repeat not, intended by marketers as a form of ste-
reotyping. The idea of segmenting markets is to identify groups of consumers with similar
needs so that marketing to them can be done more efficiently and effectively versus a
mass-market approach. That doesn’t necessarily mean that we want to pigeonhole a group
of people because they happen to share an important characteristic such as gender or place
of residence.

Segment by Demographics: Age

As we stated in Chapter 2, demographics are statistics that measure observable aspects
of a population, including size, age, gender, ethnic group, income, education, occupa-
tion, and family structure. These descriptors are vital to identify the best potential
customers for a good or service. Because they represent objective characteristics, they
usually are easy to identify, and then it’s just a matter of tailoring messages and prod-
ucts to relevant age groups. Consumers of different age groups have different needs
and wants. Members of a generation tend to share the same outlook, values, and priori-
ties. When these characteristics are combined for purposes of market segmentation and
targeting, such an approach is called generational marketing.

For example, children are an attractive age segment for many marketers. Although
kids obviously have a lot to say about purchases of toys and games, they influence other
family purchases as well (just watch them at work in the grocery store!). According to a
recent YouGov Omnibus survey, 42 percent of parents said that they gave in to a child’s
request to buy a product when the child put substantial effort into arguing for the pur-
chase. Savvy children are famous for negotiation tactics such as promising to do more
chores or to work harder in school to get better grades.4 It’s not hard to see how these
persuasive little guys could quickly wear down a parent’s resistance—buying the item
is easier than fighting the fight. For Netflix, developing content to win over children to
the platform has become a key strategy. The company developed 20 out of 70 “Netflix
Original” programs specifically for children. Netflix recognizes the importance of this
segment in cementing its position as the main source of entertainment for families and

demographics
Statistics that measure observable aspects of a
population, including size, age, gender, ethnic
group, income, education, occupation, and
family structure.

generational marketing
Marketing to members of a generation, who
tend to share the same outlook, values, and
priorities.

Demographics Psychographics Behavior

Figure 7.2 Snapshot | Segmenting Consumer Markets
Consumer markets can be segmented by demographic, psychographic,
or behavioral criteria.

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as a key source of growth in delivering long-term customer value.5 Generation Z is a
relatively new term coined to denote individuals who were born after 1994. This is the
first generation of the 21st century and it’s the most diverse we’ve ever experienced:
55 percent are Caucasian, 24 percent are Hispanic, 14 percent are African American, and
4 percent are Asian. They are accustomed to blurred gender roles, where household re-
sponsibilities don’t split along traditional lines. And, of course they are digital natives
who spend a big chunk of their time online, so they expect brands to engage them in two-
way digital conversations.

Marketers are just starting to figure out what this new group of youngsters will
be like as consumers. Having grown up during the “Great Recession,” they are not
as likely to believe in an idealized, carefree world. They tend to be independent and
gravitate to stores like Free People rather than Abercrombie & Fitch.6 They learn
about new styles from around the globe via social media, so they are equally at home
watching The Hunger Games or listening to Korean K-pop. Their idols are “self-made”
Internet stars like the Swedish video producer PewDiePie, who has the world’s most
subscribed YouTube channel, and the teenage video sensation Evan who has 25 million
followers.7

The 13- to 18-year-old age group is reported to spend more than $200 billion (both
through purchases made by them and purchases made for them) on different products.8
Much of this money goes toward “feel-good” products: music, video games, cosmetics,
and fast food—with the occasional tattoo or hookah pen thrown in as well. Because they
are so interested in many different products and have the resources to obtain them, many
marketers avidly court the teen market.9 Snapchat has designed a platform that contains
cool features (such as the ability to manipulate selfies to incorporate some of the features of
a unicorn into your face) that appeal heavily to a younger crowd, including teenagers. The
platform is designed to make it hard for one user (say for instance a parent) to eavesdrop
on the activity of another user (say for instance the child of that parent) without know-
ing their username. One of the platform’s investors, social media guru Gary Vaynerchuk,
states that, after Instagram, for “everyone from 14 to 24 in America, (Snapchat) is either the
No. 1 or No. 2 app in their lives.”10

Generation Y, often also called millennials or “Echo Boomers”, consists of people
born between the years 1979 and 1994. This age segment is the first generation to grow up
online. Generation Y is an attractive market for a host of consumer products because of its
size (approximately 27 percent of the population) and free-spending nature—as a group, it
spends about $1.3 trillion annually.11

But Generation Y consumers can be hard to reach through traditional media be-
cause they resist reading and increasingly turn off the TV to opt instead for streaming
video and digital video recordings. As a result, many marketers have had to develop
other ways to reach this generation “where they live,” which is in large measure
through their smartphones and tablets, using social media and related technology.
We’ll talk more about the shift to new-age marketing communications techniques later
in this book.

We already know that Gen Yers are tech savvy, but what else defines them as a genera-
tion compared to past generations? A Pew Research study shows that compared to past
generations (when they were in the same age range) GenYers are more racially diverse and
more highly educated. In addition, a greater proportion of them have never been married
when compared to other generations (68 percent compared to 56 percent for Generation X,
which is the next closest generation).12

The group of consumers born between 1965 and 1978 consists of 46 million Americans
known as Generation X, who unfortunately and undeservedly came to be called slackers,
or busters (for the “baby bust” that followed the “baby boom”). Many of these people have
a cynical attitude toward marketing—a chapter in a famous book called Generation X is
titled “I Am Not a Target Market!”13

Generation Z
The group of consumers born after 1994.

digital natives
Individuals who spend a big chunk of their time
online, so they expect brands to engage them in
two-way digital conversations.

Generation Y (millennials)
The group of consumers born between 1979
and 1994.

Generation X
The group of consumers born between 1965
and 1978.

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Despite this tough reputation, members of Generation X, the oldest of whom are now in
their early fifties, have mellowed with age. In retrospect, they also have developed an identity
for being an entrepreneurial group. One study revealed that Gen Xers led much of the modern
technology revolution, and now firms seek them out for their entrepreneurial talents. Many
people in this segment were determined to have stable families after being brought up as latch-
key children themselves as both their parents put in long days at work. Gen Xers tend to view
the home as an expression of individuality rather than material success. More than half are
involved in home improvement and repair projects.14 So much for Gen Xers as slackers!

Baby boomers, consumers born between 1946 and 1964 and who are now in their fif-
ties and sixties, are an important segment to many marketers—if for no other reason than
that there are so many of them who have a lot of money. The baby boom occurred when
soldiers came flooding home after World War II and there was a rush to get married and
start families. Back in the 1950s and 1960s, couples started having children younger and
had more of them than the previous generation. The resulting glut of kids really changed
the infrastructure of the country: more single-family houses, more schools, migration to the
suburbs, and freeways to commute from home to work.

More recently some research has suggested that it may be beneficial for marketers to
treat this generational segment as two different groups for purposes of considering their
discretionary and non-discretionary spending capabilities. A survey by Gallup indicates
that there are significant differences between baby boomer spending for those born in the
first half of the generation’s age range (“leading-edge Boomers”) compared to those born
in the second half of the generation’s age range (“trailing-edge Boomers”). In general,
the trailing-edge boomers find themselves spending significantly more on non-discre-
tionary items (e.g., house maintenance, groceries, etc.) than their leading-edge boomer
counterparts. One explanation for this difference in spending capabilities between these
two groups may relate to differences in financial obligations. The older group of Baby
Boomers (aged 59 to 68) may have reached a point where they are no longer paying off
mortgages or higher education debts. For marketers that sell non-discretionary products,
this knowledge provides important guidance to develop marketing strategies.15

Currently, the U.S. Census Bureau estimates that there are slightly more than 46 mil-
lion Americans aged 65 or older, an increase from prior years. Florida and Maine ranked
first and second in the highest percentage of individuals aged 65 and older with about 19
percent and 18 percent, respectively.16 To better accommodate the senior market, compa-
nies are changing their stores and their products. CVS, for example, introduced carpeting
in its stores to reduce slipping, and Walgreens added magnifying glasses in aisles that
featured products with fine print. Kimberly-Clark not only redesigned its Depends line to
look more like regular underwear but also will now shelve the product among other gen-
eral hygiene products and not in an “old person’s” section of the store.17

Many mature consumers enjoy leisure time and continued good health. Indeed, a key
question today is, “Just what is a senior citizen, when people live longer and 80 is the new
60?” As we will see later in the chapter, perhaps it isn’t age but rather lifestyle factors, in-
cluding mobility, that best define this group. More and more marketers offer products that
appeal to active-lifestyle seniors. And they often combine the product appeal with a nostal-
gia theme that includes music popular during the seniors’ era of youth. People tend to pre-
fer music that was released when they were teenagers or young adults, with interest peak-
ing between ages 24 and 25. For years, Sandals Resorts, whose advertising imagery tends
to favor Boomers, has used the song “(I’ve Had) The Time of My Life” in commercials for
its romantic vacation destinations in the Caribbean. The song, recorded by Bill Medley and
Jennifer Warnes, was made famous in the classic 1987 movie Dirty Dancing. As nostalgia,
it does double duty because the movie itself was set in 1963, so it conjures up memories of
both the 1980s and the 1960s for this key boomer demographic segment for Sandals.18 And
more recently history repeated itself, as ABC presented a three-hour remake of the show
starring Abigail Breslin of Scream Queens fame.19

baby boomers
The segment of people born between 1946 and
1964.

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Segment by Demographics: Gender

Many products, from fragrances to fashion apparel and accessories, specifically appeal to
men or women. Segmenting by gender starts at an early age—even diapers come in pink
for girls and blue for boys.

In some cases, manufacturers develop parallel products to appeal to each sex. For exam-
ple, male grooming products have traditionally been Gillette’s priority since the company’s
founder King Gillette (yes, his first name was actually King) introduced the safety razor in
1903. But today, the Venus line by Gillette is a top-selling razor for women of all ages.

A small microbrewer in California called She Beverage Co. applied to register with the U.S.
Patent and Trademark Office the phrase “Queen of Beer,” which it has been using on its web-
site as well as in its social media communications. “The King of Beers” Budweiser contested
the application and general use of the phrase on the grounds that it might cause confusion for
consumers, resulting in drawing the incorrect conclusion that the beer is affiliated with the
Anheuser-Busch company (and all of the brand benefits that come along with that association).
She Beverage Co. recently has begun to sell its beers in restaurants and stores with a focus on
the female consumer and the claim that its beers are made to better fit to female taste and style
preferences that are underserved within the male-dominated beer market. She Beverage con-
tinues to pursue its trademark, vowing to keep up the fight so the company can communicate
to female beer drinkers that this is beer formulated specifically with their preferences in mind.20

Metrosexual as a marketing buzzword gained steam beginning in the late 2000s. The
term describes a straight, urban man who is keenly interested in fashion, home design,
gourmet cooking, and personal care. Metrosexuals are usually well-educated urban dwell-
ers who are in touch with their feminine side. Although many men are reluctant to overtly
identify with the metrosexual, there’s no denying that a renewed interest in personal care
products, fashion accessories, and other “formerly feminine” product categories creates
many marketing opportunities. Mainstream newspapers such as the New York Times offer
regular segments dedicated to male fashion and grooming.

Recently, there’s been broad acceptance and assimilation of the values and behaviors
ascribed to metrosexuals within the mainstream market. Retailers have been making an
extra effort to provide a more pleasurable experience to men who are spending more time
on extensive in-store browsing and purchasing across product lines, in stark contrast to the
quick in-and-out style of shopping primarily associated with men before. For instance, the
high-end retailer Club Monaco now offers bars, cafes, bookstores, and even barbershops in
some of its retail locations.21

You’ve no doubt heard of the “Great Recession” that began in late 2007, which was a
shock to marketers who had to quickly scramble to understand its impact on purchasing
habits. An interesting trend related to gender segmenta-
tion fueled by the recession and its aftermath is that men
now are increasingly likely to marry wives with more
education and income than they have, and the reverse
is true for women. In recent decades, with the rise of
well-paid working wives, the economic gains of mar-
riage have been a greater benefit for men. The educa-
tion and income gap has grown even more in the latest
recession, when men held about three in four of the jobs
that were lost. In 1960, 13.5 percent of wives had hus-
bands who were better educated, and 6.9 percent were
married to men with less education. By 2012, the com-
parable figures were 19.9 percent and 20.7 percent—for
the first time in history, more women “married down,”
educationally speaking, than men.22 In 1960,6.2 percent
of husbands had wives who made more money; in 2007,
24 percent did.23

metrosexual
A straight, urban male who is keenly interested
in fashion, home design, gourmet cooking, and
personal care.

SHE Beer specifically targets female brew drinkers.

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Segment by Demographics: Family Life Cycle

Because family needs and expenditures change over time, one way to segment consumers
is to consider the stage of the family life cycle they occupy. (You learned about the family
life cycle in Chapter 6.) Not surprisingly, consumers in different life cycle segments are
unlikely to need the same products, or at least they may not need these things in the same
quantities. Single-person households have grown over the years, influenced by such fac-
tors as changing views toward marriage and other shifting lifestyle choices. This trend is
expected to continue to grow over time and is projected to have an impact on marketing
in many industries including housing and health care.24 A report from the research firm
the NPD Group noted that recent growth in snack food consumption could be attributed
largely to the growth in single-person households.25,26

But not all attempts at marketing to the family life cycle succeed. Gerber once tried
to market single-serving food jars to single seniors—a quick meal for one person who
lives alone. The manufacturer called these containers “Singles.” However, Gerber’s strong
identification with baby food worked against it: The product flopped because their target
market was embarrassed to be seen buying baby food.27

As families age and move into new life stages, different product categories ascend
and descend in importance. Young bachelors and newlyweds are the most likely to exer-
cise, go to bars and movies, and consume alcohol (in other words, party while you can).
Older couples and bachelors are more likely to use maintenance services. Seniors are a
prime market for resort condominiums and golf products. Marketers need to identify the
family life cycle segment of their target consumers by examining purchase data by family
life cycle group.

Cultural changes continually create new opportunities as people’s roles change. For
example, boomer women in their sixties are a hot new market for what the auto industry
calls “reward cars”: sexy and extravagant vehicles. Says president of Women-Drivers.com
Anne Fleming, “As they graduate from baseball and ballerina mom, they are seizing their
new-found freedom and buying sexy, indulgent ‘me-mobiles.’”28

Segment by Demographics: Income and Social Class

The distribution of wealth is of great interest to marketers because it determines which
groups have the greatest buying power. Buying power can help marketers to determine
how to better match different products and versions of products to different consumer
groups based on an understanding of what discretionary and nondiscretionary alloca-
tions of funds they are able to make. After a more than 50-year run during which the
truly wealthy just kept getting richer, the Great Recession took some of the wind out
of their sails because of heavy investment losses. While at this writing the losses have
been moderated by a rebound in the stock market, that history of risk and volatility in
investments has likely impacted the consumer behavior of the rich just as it has other
income segments. Of course, households making $100,000 or more certainly do not in
most cases come close to being part of that “truly wealthy” crowd, but marketers might-
ily depend on their discretionary spending. Although they represent only 20 percent of
U.S. households, they control more than half of all income and are far less likely than
everyone else to be restrained by tight credit markets. On average, historically the af-
fluent are 2.6 times more likely to make purchases in general, and when they do, they
spend 3.7 times more.29

In the past, it was popular for marketers to consider social class segments, such as
upper class, middle class, and lower class. However, many consumers buy not accord-
ing to where they actually fall in that framework but rather according to the image they
wish to portray. In recent years, luxury car manufacturers such as Mercedes, BMW, and
Audi have developed versions of cars that are priced at less than half the price they
charge for one of their traditional models. Seeking to attract consumers who view the
brands as aspirational purchases, the approach has been so successful at increasing

buying power
A concept in segmentation that can help
marketers to determine how to better match
different products and versions of products
to different consumer groups based on an
understanding of what discretionary and
nondiscretionary allocations of funds they are
able to make.

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sales and market share that avant-garde electric car manufacturer Tesla unveiled a
“low-end” Model III for less than half the price of its roadster to compete for these con-
sumers, and the company can’t keep up with the demand after getting blanketed with
preorders.30

Segment by Demographics: Ethnicity

A consumer’s national origin is often a strong indicator of his or her preferences for specific
magazines or TV shows, foods, apparel, and leisure activities. Marketers need to be aware
of these differences and sensitivities—especially when they invoke outmoded stereotypes
to appeal to consumers of diverse races and ethnic groups.

African Americans, Asian Americans, and Hispanic Americans are the largest ethnic
groups in the U.S. The Census Bureau projects that by the year 2050, non-Hispanic whites
will make up just less than 50 percent of the population (compared to 74 percent in 1995)
as these other groups grow. Let’s take a closer look at each of these important ethnic
segments.

African Americans make up more than 13 percent of the U.S. population.31 Many
marketers recognize the huge impact of this racial subculture and work hard to identify
products and services that will appeal to these consumers. The toy market is no excep-
tion—children tend to gravitate toward toys and characters that look like them. The Disney
TV show Doc McStuffins that stars an African American character who fixes toys in her
backyard clinic illustrates this appeal. The blockbuster show sold about $500 million in
merchandise last year. Its success reflects demographic changes in the United States that
create opportunities for a diversity of ethnic characters.32

Although their numbers are still relatively small, Asian Americans are the fastest-
growing minority group in the U.S. Between 2002 and 2014, the Asian American popu-
lation grew by 46 percent to reach 19.4 million individuals with an expected growth of
150 percent between 2015 and 2050. For marketers this segment is especially attractive
given its’ substantial buying power that is estimated to be close to $800 billion. An
amazing fact is that this figure is almost quadruple the buying power estimated for
all millennials ($200 billion)!33 BuzzFeed makes an effort to court Asian-Americans
by publishing content on topics and experiences highly relatable to this group, such
as posts tailored to specific Asian subsegments like “22 Signs You Grew up with
Immigrant Chinese Parents” and “21 Annoying Comments Filipinos Are Tired of
Hearing.” This approach to delivering fresh and specifically relatable content to dif-
ferent segments enables BuzzFeed to connect with distinct cultural groups of Asian
Americans as well as other types of consumer segments.34 It also makes BuzzFeed at-
tractive to marketers who want to develop content marketing that will resonate with
specific customer groups. This term refers to the strategy of establishing thought lead-
ership in the form of bylines, blogs, commenting opportunities, videos, sharable social
images, and infographics. A key departure is that these messages look like the kind of
content that “ordinary” people post rather than the traditional advertising messages
consumers are used to seeing.

The Hispanic American population is a real emerging superstar segment for this
decade, a segment that mainstream marketers today actively cultivate. Hispanics have
overtaken African Americans as the nation’s largest minority group.35 In the U.S., Hispanic
buying power is estimated to exceed $1.5 trillion—a greater than 50 percent increase from
where the segment’s buying power was in 2010.36 In addition to its rapid growth, five
other factors make the Hispanic segment attractive to marketers:

Hispanics tend to be brand loyal, especially to products made in their country of
origin.

They tend to be highly concentrated by national origin, which makes it easy to fine-
tune the marketing mix to appeal to those who come from the same country.

content marketing
The strategy of establishing thought leadership
in the form of bylines, blogs, commenting
opportunities, videos, sharable social images,
and infographics.

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This segment is young (the median age of Hispanic Americans is 23.6, compared with
the U.S. average of 32), which is attractive to marketers because it is a great potential
market for youth-oriented products, such as cosmetics and music.

The average Hispanic household contains 3.5 people, compared to only 2.7 people for
the rest of the U.S. For this reason, Hispanic households spend 15 to 20 percent more
of their disposable income than the national average on groceries and other household
products.

In general, Hispanic consumers are receptive to relationship-building approaches
to marketing and selling. For this reason, there are many opportunities to build loy-
alty to brands and companies by emphasizing relationship aspects of the customer
encounter.37

As with any ethnic group, appeals to Hispanic consumers need to take into account
cultural differences. For example, Hispanics didn’t appreciate the successful mainstream
“Got Milk?” campaign because biting, sarcastic humor is not part of their culture. In addi-
tion, the notion of milk deprivation is not funny to a Hispanic mother—if she runs out of
milk, this means she has failed her family. To make matters worse, “Got Milk?” translates
as “Are You Lactating?” in Spanish. Thus, new Spanish-language versions were changed
to “And you, have you given them enough milk today?” with tender scenes centered on
cooking f lan (a popular pudding) in the family kitchen. And Taco Bell’s “Yo quiero Taco
Bell” uttering Chihuahua dog was put out to pasture years ago.

It is not an overstatement to say that Latino youth are changing mainstream culture.
Many of these consumers are “young biculturals” who bounce back and forth between
hip-hop and rock en Español, blend Mexican rice with spaghetti sauce, and spread pea-

nut butter and jelly on tortillas. In fact, we find many bicultural Hispanics
in both younger and older age groups—one study reported that fully
44 percent of the Hispanic-American population identifies as bicultural.
Within that group there are those who place a greater emphasis on pre-
serving their heritage and those who are more open to experimenting
with it in the context of new cultural influences.38 One caution about the
Hispanic market is that the term Hispanic itself actually is a misnomer. For
example, Cuban Americans, Mexican Americans, and Puerto Ricans may
share a common language, but their history, politics, and culture have
many differences. Marketing to them as though they are a homogeneous
segment can be a big mistake. However, the term is still widely used as a
demographic descriptive. By 2020, the U.S. Census Bureau estimates, the
number of Hispanic teens will grow by 62 percent, compared with 10 per-
cent growth in teens overall. They seek spirituality, stronger family ties,
and more color in their lives—three hallmarks of Latino culture. Music
crossovers from the Latin charts to mainstream lead the trend, including
pop idols Shakira, Enrique Iglesias, Marc Anthony, Jennifer Lopez, and
Reggaeton sensation Daddy Yankee.

An important outcome of the increase in multiethnicity is the op-
portunity for increased cultural diversity in the workplace and elsewhere.
Cultural diversity, a management practice that actively seeks to include
people of different sexes, races, ethnic groups, and religions in an orga-
nization’s employees, customers, suppliers, and distribution channel
partners, is today business as usual rather than an exception. Marketing
organizations benefit from employing people of all kinds because they
bring different backgrounds, experiences, and points of view that help the
firm develop strategies for its brands that will appeal to diverse customer
groups.

cultural diversity
A management practice that actively seeks to
include people of different sexes, races, ethnic
groups, and religions in an organization’s
employees, customers, suppliers, and distribution
channel partners.

The crossover sensation Marc Anthony is helping to make Latino music
mainstream.

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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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Segment by Demographics: Place of Residence

Recognizing that people’s preferences often vary depending on where they live, many
marketers tailor their offerings to specific geographic areas, an approach called geographic
segmentation. Google Earth and other similar applications of a geographic information
system (GIS) have ramped up geographic approaches to segmentation. A GIS system can
elegantly combine a geographic map with digitally stored data about the consumers in a
geographic area. Thus, market information by geographic location is much more conve-
nient for use in market planning and decision making than ever before.

When marketers want to segment regional markets even more precisely, they some-
times combine geography with demographics using the technique of geodemography. A
basic assumption of geodemography is that “birds of a feather flock together”—people
who live near one another share similar characteristics. Sophisticated statistical techniques
identify geographic areas that share the same preferences for household items, magazines,
and other products. This lets marketers construct segments of households with a common
pattern of preferences. This way, they can hone in on those customers most likely to be in-
terested in its specific offerings, in some cases so precisely that families living on one block
will belong to a segment, whereas those on the next block will not.

One widely used geodemographic system is PRIZM, which is a large database de-
veloped by Nielsen Claritas. This system classifies the U.S. population into 66 segments
based on various socioeconomic data, such as income, age, race, occupation, education, and
household composition as well as lifestyle attributes that are critical to marketing strate-
gies, shopping patterns such as where they vacation, what they drive and their favorite
brands, and media preferences. The 66 segments range from the highly affluent “Upper
Crust” and “Blue Blood Estates” to the lower-income “Big City Blues or “Low-Rise Living”
neighborhoods.

Here are a few thumbnail sketches of different segments of relatively younger con-
sumers a marketer might want to reach depending on the specific product or service he or
she sells:

Young Digerati are tech-savvy and live in fashionable neighborhoods on the urban
fringe. Affluent, highly educated, and ethnically mixed, Young Digerati communities
are typically filled with trendy apartments and condos, fitness clubs and clothing bou-
tiques, casual restaurants, and all types of bars—from juice to coffee to microbrew. The
Young Digerati are much more likely than the average American consumer to shop at
Bloomingdale’s, travel to Asia, read Dwell, watch the Independent Film Channel, and
buy an Audi A3.

Kids & Cul-de-Sacs are upper-middle-class, suburban, married couples with children—
that’s the skinny on Kids & Cul-de-Sacs, an enviable lifestyle of large families in
recently built subdivisions. This segment has a high rate of Hispanics and Asian
Americans. It is also a refuge for college-educated, white-collar professionals with
administrative jobs and upper-middle-class incomes. Their nexus of education, af-
fluence, and children translates into large outlays for child-centered products and
services. They are much more likely than the average American consumer to order
from target.com, play fantasy sports, read Parents magazine, watch X Games, and buy
a Honda Odyssey.

Shotguns & Pickups came by its moniker honestly: it scores near the top of all lifestyles
for owning hunting rifles and pickup trucks. These Americans tend to be young,
working-class couples with large families, living in small homes and manufactured
housing. Nearly a third of residents live in mobile homes, more than anywhere else in
the nation. They are much more likely than the average American consumer to order
from Mary Kay, own a horse, read Four Wheeler, watch Maury, and drive a Ram diesel
pickup.

geographic segmentation
An approach in which marketers tailor their
offerings to specific geographic areas because
people’s preferences often vary depending on
where they live.

geographic information system (GIS)
A system that combines a geographic map with
digitally stored data about the consumers in a
particular geographic area.

geodemography
A segmentation technique that combines
geography with demographics.

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One interesting specific approach to location-based targeting is geotargeting, which
in Internet marketing refers to determining the geographic location of a website visitor
and delivering different content to that visitor based on his or her location, such as country,
region/state, city, metro code/ZIP code, organization, IP address, Internet service provider
(ISP), or other criteria.39 Campari America, for instance, targeted consumers who were
between the ages of 21 and 34 while they were in neighborhoods with a high proportion of
bars and restaurants during times when consumers are known to have a few drinks, using
a promotion for $5 off of a future ride using the ride-sharing app Lyft. The deal was offered
through specific mobile apps that this targeted segment is known to use while out unwind-
ing at restaurants and bars. The overall intention of the campaign was to both promote
responsible behavior while out drinking and to increase awareness and favorable attitudes
toward Campari and some of its staple brands of alcohol. More than 20 percent of those
who received the offer chose to accept it, a high rate of acceptance by digital advertising
standards.40,41

Ultimately, highly precise geodemographic
segmentation enables marketers to practice
micromarketing, which is the ability to identify and
target small geographic segments that sometimes
amount to just one or a few individuals—a capabil-
ity you read about in Chapter 5 that we referred to
as one-to-one marketing.

Segment by Psychographics

Demographic information is useful, but it does
not always provide enough information to divide
consumers into meaningful segments. Although
we can use demographic variables to discover, for
example, that the female college student segment
uses perfume, we won’t be able to tell whether cer-
tain college women prefer perfumes that express
an image of, say, sexiness rather than athleticism.

As we said in Chapter 6, psychographics seg-
ment consumers in terms of psychological and

geotargeting
Determining the geographic location of a
website visitor and delivering different content
to that visitor based on his or her location.

micromarketing
The ability to identify and target very small
geographic segments that sometimes amount to
individuals.

psychographics
The use of psychological, sociological, and
anthropological factors to construct market
segments.

It should be clear from your reading that geodemographic and related
approaches to segmentation can be powerful and allow for a high level
of precision in identifying potentially fruitful segments to target. When it
comes to metrics, good data about the characteristics of the various con-
sumer segments that you may wish to ultimately target is critical because
target marketing is ultimately a strategic investment of resources in the
segments that appear to have the best return on investment.

To make the power of the geodemographic technique and resulting
information for decision making come alive, let’s try a demonstration of
the PRIZM database that gets close to home.

Apply the Metrics

1. Go to the Nielsen My Best Segments website (search for the phrase
“Nielsen My Best Segments” website on any search engine).

2. Click on Zip Code Lookup, and then type in your own ZIP code along
with the provided security code, then click SUBMIT.

3. Several segments should then come up that comprise your ZIP code.
Click on each for more detail.

4. You will also see some quick facts in a box that further describe some
basic demographics of your ZIP code (population, median age, me-
dian income, and consumer spend total and per household).

5. What is your reaction to the segment profiles and other information
about your ZIP code? Are you surprised with the results, or was it
what you expected?

6. Given the profile provided, what sort of products and services do
you think are most likely to be particularly attractive to the segments
represented?

Metrics Moment

A Harley rider’s profile includes both thrill-seeking and affinity for a countercultural image (at least on
weekends).

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behavioral similarities, such as shared activities, interests, and opinions, or AIOs.42
Marketers often develop profiles of the typical customers for whom they desire to paint
a more vivid picture. Although some marketers and their creative agencies develop their
own psychographic techniques to classify customers, others subscribe to services that di-
vide the entire U.S. population into segments and then provide this information to clients
for use in proprietary marketing project applications such as strategy planning. The best
known of these systems is VALS™, which is a product of Strategic Business Insights (SBI).
VALS™ divides U.S. adults into eight groups according to what drives them psychologi-
cally as well as by their economic resources.

One segment that combines a psychographic/lifestyle component with a heavy dose
of generational marketing is the gamer segment, sometimes referred to as the gamer
generation—“gamer” as in “video games,” of course. This group grew up playing video
games as second nature for primary recreation, and as they have entered college and
the workforce, they continue to carry many gaming sensibilities with them. Video gam-
ing is clearly a lifestyle, and much as the company Google turned into the generic verb
“to google” in the 2000s, in this decade the buzz term du jour is gamification, which, as
we saw in Chapter 6, is a strategy in which marketers apply game design techniques,
often by awarding points or badges to nongame experiences, to drive consumer behav-
ior (e.g., the gamification of practice exams where you might earn badges for getting
right answers and moving to the next level of difficulty in your homework). And, by
the way, just in case you didn’t know, a badge is some type of milestone or reward a
player earns when he or she progresses through a gamified application. If you’ve ever
checked into Foursquare and earned a badge for a (dubious) achievement like “Gym
Rat,” “Overshare,” or even “Crunked,” you know how this works. Marketers would
be wise to think about what sorts of badges might appeal to the gamer segment as they
become more and more engaged as consumers who are highly likely to do much of their
shopping online.

Segment by Behavior

People may use the same product for different reasons, on different occasions, and in differ-
ent amounts. So, in addition to demographics and psychographics, it is useful to study what
consumers actually do with a product. Behavioral segmentation slices consumer segments
on the basis of how they act toward, feel about, or use a product. One way to segment on the
basis of behavior is to divide the market into users and nonusers of a product. Then marketers
may attempt to reward current users or try to win over new ones. In addition to distinguish-
ing between users and non-users, marketers can describe current customers as heavy, moder-
ate, and light users. They often do this according to a rule of thumb we call the 80/20 Rule:
20 percent of purchasers account for 80 percent of the product’s sales (the ratio is an approxi-
mation, not gospel). This rule means that it often makes more sense to focus on the smaller
number of people who are really into a product rather than on the larger number who are just
casual users.

Starbucks recently chose to redefine its loyalty program to better reward consumers
who spend more with the company, in contrast to the old structure that rewarded consum-
ers for the number of transactions they made. Consider, for instance, that before the change
a customer who bought a tall coffee received the same number of stars as a customer who
purchased a venti white chocolate mocha and a breakfast sandwich—clearly a big differ-
ence in revenue generation for the firm. Although the change to Starbucks’ loyalty program
received a fair amount of initial negative feedback (presumably from those customers who
will not benefit as greatly under the new terms of the program), industry analysts view the
move as smart in the long term because it will ultimately enable Starbucks to offer greater
rewards to its most valuable customers (those who spend more through larger purchases
while also purchasing more frequently).43

VALS™

A psychographic segmentation system that
divides U.S. adults into eight groups according
to what drives them psychologically as well as
by their economic resources.

gamer segment
A consumer segment that combines a
psychographic/lifestyle component with a heavy
dose of generational marketing.

badge
A milestone or reward earned for progressing
through a video game.

behavioral segmentation
A technique that divides consumers into
segments on the basis of how they act toward,
feel about, or use a good or service.

80/20 Rule
A marketing rule of thumb that 20 percent of
purchasers account for 80 percent of a product’s
sales.

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A related concept to the 80/20 Rule in behav-
ioral segmentation is usage rate, which reflects
the quantity purchased or frequency of use among
consumers of a particular product or service. The
entire travel and hospitality industry cultivates
high users through their loyalty programs, such
as American Airlines AAdvantage or Marriott
Rewards. The high-use segment is often incredibly
profitable over the long run.

Although the 80/20 Rule still holds true in
the majority of situations, the Internet’s ability to
offer an unlimited choice of goods to billions of
people has changed how marketers think about
segmentation. An approach called the long tail
turns traditional thinking about the virtues of sell-
ing in high volume on its head. The basic idea is
that we need no longer rely solely on big hits (like
blockbuster movies or best-selling books) to find
profits. Companies can also make money when
they sell small amounts of items that only a few
people want—if they sell enough different items.

For many companies the selling of digital products that can be transferred to purchas-
ers through an Internet connection helps to support a long tail approach because it reduces
the cost of storage of products and allows for the fulfillment of consumer demand on an
as-needed basis. Amazon, the Apple iTunes Store, and the Google Play Store are prime ex-
amples of sites that are set up to be able to benefit from the large and small sales of a wider
array of goods, which should also benefit both the big and small sellers that offer products
through their platforms.

Another way to segment a market on the basis of behavior is to look at usage occa-
sions, or when consumers use the product most. We associate many products with spe-
cific occasions, whether time of day, holidays, business functions, or casual get-togethers.
Businesses often divide up their markets according to when and how their offerings are in
demand. Ruth’s Chris Steakhouse is by far the market leader in the high-end steak restau-
rant category featuring USDA Prime Beef as its’ signature dish. Ruth’s is well aware that it
is a special-occasion location—graduations, birthdays, promotions, you name it—and folks
want to celebrate at Ruth’s. And they are all too happy to accommodate, often surprising
guests with special table decorations for the occasion and a nice dessert treat, compliments
of the chef.

And in the online space, Google enables its advertising clients to target certain ads
to certain segments of search engine users based on data such as Google domain, query
entered, IP address, and language preference. This way, companies can have Google auto-
matically sort and send the intended ad to certain market segments. Thus, it is possible for
advertisers on Google to tailor their automatically targeted ads based on seasonality—you
will see more TurboTax ads on Google pages during tax season, even if people aren’t que-
rying tax software.44

Segment B2B Markets
We’ve reviewed the segmentation variables marketers use to divide up the consumer
pie, but how about all those B2B marketers out there? Adding to what we learned about
business markets in Chapter 6, it’s important to know that segmentation also helps
them better understand their customers. Although the specific variables may differ,

usage rate
A measurement that reflects the quantity
purchased or frequency of use among
consumers of a particular product or service.

long tail
A new approach to segmentation based on the
idea that companies can make money by selling
small amounts of items that only a few people
want, provided they sell enough different items.

usage occasions
An indicator used in behavioral market
segmentation based on when consumers use a
product most.

The Biltmore Estate in Asheville, North Carolina, increased attendance during its annual Christmas
celebration as part of a strategy to segment by usage occasion. The estate’s marketers developed four
separate strategies to target different types of visitors, including heavy users who have made
a Christmas pilgrimage an annual family tradition.

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the underlying logic of classifying the larger market into manageable pieces that share
relevant characteristics is the same whether the product you sell is pesto or pesticides.

Organizational demographics are organization-specific dimensions that marketers
use to describe, classify, and organize different organizations for the purpose of segment-
ing business-to-business markets. Organizational demographics also help a B2B marketer
understand the needs and characteristics of its potential customers. These classification di-
mensions include the size of the firms (either in total sales or in number of employees), the
number of facilities, whether they are a domestic or a multinational company, their pur-
chasing policies, and the type of business they are in. B2B markets may also be segmented
on the basis of the production technology they use and whether the customer is a user or a
nonuser of the product.

Many industries use the North American Industry Classification System (NAICS)
we discussed in Chapter 6 to obtain information about the size and number of
companies operating in a particular industry. B2B marketers often consult general in-
formational business and industry databases on the web, such as Hoover ’s or Yahoo!
Finance for insight and up-to-date information on private and public companies
worldwide.

organizational demographics
Organization-specific dimensions that can be
used to describe, classify, and organize different
organizations for the purpose of segmenting
business-to-business markets.

Step 2: Targeting
We’ve seen that the first step in a target marketing strategy is seg-
mentation, in which the firm divides the market into smaller groups
that share certain characteristics. The next step is targeting, in which
marketers evaluate the attractiveness of each potential segment and
decide in which of these groups they will invest resources to try to
turn them into customers. The customer group or groups they select
are the firm’s target market, which, as you learned in Chapter 1, is the
segment(s) on which an organization focuses its marketing plan and
toward which it directs its marketing efforts.

In this section, we’ll review the three phases of targeting: evaluate market segments,
develop segment profiles, and choose a targeting strategy. Figure 7.3 illustrates these
three phases.

Phases of Targeting

Phase 1:

Evaluate Market Segments

Just because a marketer identifies a segment does not necessarily mean that it’s a
useful target. A viable target segment should satisfy the following requirements:

Are members of the segment similar to each other in their product needs and wants
and, at the same time, different from consumers in other segments? Without real
differences in consumer needs, firms might as well use a mass-marketing
strategy. It’s a waste of time to develop two separate lines of skin care
products for working women and nonworking women if both segments
have the same complaints about dry skin.

Can marketers measure the segment? Marketers must know something about
the size and purchasing power of a potential segment before they decide if
it’s worth their efforts.

Is the segment large enough to be profitable now and in the future? For ex-
ample, a graphic designer who hopes to design web pages for Barbie-doll

targeting
A strategy in which marketers evaluate the
attractiveness of each potential segment and
decide in which of these groups they will invest
resources to try to turn them into customers.

target market
The market segments on which an organization
focuses its marketing plan and toward which it
directs its marketing efforts.

7.3
OBJECTIVE
Explain how market-
ers evaluate seg-
ments and choose a
targeting strategy.

(pp. 217–220)

Evaluate Market Segments

Develop Segment Profiles

Choose a Targeting Strategy

Figure 7.3 Process | Phases of Targeting
Targeting involves three distinct phases of activities.

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collectors must decide whether there are enough hard-core aficionados to make this
business worthwhile and whether the trend will continue.

Can marketing communications reach the segment? It is easy to select TV programs or
magazines that will efficiently reach older consumers, consumers with certain levels
of education, or residents of major cities because the media they prefer are easy to
identify. However, it is unlikely that marketing communications can reach only left-
handed blondes with multiple piercings who listen to Taylor Swift overdubbed in
Mandarin Chinese.

Can the marketer adequately serve the needs of the segment? Does the firm have the
expertise and resources to satisfy the segment better than the competition? Some
years ago, consumer-products manufacturer Warner-Lambert (now a part of Pfizer)
made the mistake of trying to enter the pastry business by purchasing Entenmann’s
Bakery. Entenmann’s sells high-end boxed cakes, cookies, pastries, and pies in super-
markets. Unfortunately, Warner-Lambert’s expertise at selling Listerine mouthwash
and Trident gum did not transfer to baked goods, and it soon lost a lot of “dough”
on the deal.

Phase 2: Develop Segment Profiles

Once a marketer identifies a set of usable segments, it is helpful to generate a profile
of each to really understand segment members’ needs and to look for business op-
portunities. This segment profile is a description of the “typical” customer in that
segment. A segment profile might, for example, include customer demographics,
location, lifestyle information, and a description of how frequently the customer buys
the product. When the marketers of General Mills’ product Hamburger Helper de-
cided to target cash-strapped millennials, they had to adjust the image they presented
on social media. On one April Fools’ Day, the packaged food company announced
through social media the release of a mixtape titled “Watch the Stove” containing five
light-hearted Hamburger Helper–themed rap songs created by a group of college stu-
dents at McNally Smith’s College of Music. The mixtape was well received, and was
played more than 270,000 times on SoundCloud by 5 p.m. on the day of release. One
of the company’s marketing communications planners describes the target segment
of consumers as “a young, urban, millennial guy making Hamburger Helper in his
dorm room.”45

Phase 3: Choose a Targeting Strategy

A basic targeting decision centers on how finely
tuned the target should be: Should the company
go after one large segment or focus on meeting
the needs of one or more smaller segments?
Let’s look at four targeting strategies, which

Figure 7.4 summarizes.
A company like Walmart that selects an

undifferentiated targeting strategy appeals
to a broad spectrum of people. If successful,
this type of operation can be efficient because
production, research, and promotion costs
benefit from economies of scale—it’s cheaper
to develop one product or one advertising
campaign than to choose several targets and
create separate products or messages for each.

segment profile
A description of the “typical” customer in a
segment.

undifferentiated targeting strategy
Appealing to a broad spectrum of people.

Volkswagen reminds us that the same product won’t work for everyone.

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But the company must be willing to bet that people have similar needs so that the same
product and message will appeal to many customers.

A company that chooses a differentiated targeting strategy develops one or more prod-
ucts for each of several customer groups with different product needs. A differentiated
strategy is called for when consumers choose among well-known brands that have distinc-
tive images, and the company can identify one or more segments that have distinct needs
for different types of products.

Despite its highly publicized product safety issues in 2014, GM historically has
been a leader in differentiated strategy with distinct product lines that satisfy the needs
of multiple customer groups. Its Cadillac and Buick product lines cater to consumers
who want luxury. The Chevrolet Volt hybrid provides value to drivers who want to
save gas money and the environment. And finally, the GMC product line appeals to

differentiated targeting strategy
Developing one or more products for each of
several distinct customer groups and making
sure these offerings are kept separate in the
marketplace.

Customized Marketing

Concentrated Marketing

Differentiated Marketing

Undifferentiated Marketing

Figure 7.4 Snapshot | Choose a
Targeting Strategy

Marketers must decide on a targeting
strategy. Should the company go after
one total market, one or several market
segments, or even target customers
individually?

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drivers who need an everyday truck, crossover, or SUV that is both
dependable and stylish.

Differentiated marketing can also involve connecting one prod-
uct with multiple segments by communicating differently to ap-
peal to those segments. Again using the venerable “Got Milk?”
campaign as an example, one of the campaign’s most classic ads
featured Aerosmith’s Steven Tyler to appeal to both aging boomers
who got into the band in the 1970s and Gen Yers who discovered
the band in the 1990s as a result of Run-DMC’s remake of “Walk
This Way” as well as Tyler ’s resurgence during his run as a judge
on American Idol.

When a firm offers one or more products to a single segment,
it uses a concentrated targeting strategy. Smaller firms that do not
have the resources or the desire to be all things to all people often do
this. The company GreatCall Wireless developed a cellphone known
as the Jitterbug back in the mid-2000s. This product ran counter
to the trend toward increasingly technologically sophisticated cell
phones (and smartphones) by offering a flip cellphone with fewer
and larger buttons, as well as a focused range of capabilities. The
original Jitterbug was primarily targeted toward seniors with a de-
sire for a simpler communication device. But over the years it has
evolved to offer options including a model that “resembles” a smart-

phone in appearance (important for today’s seniors to “look hip”) but with a stream-
lined range of choices on its touch screen interface and features such as an urgent care
button that are of particular value to this older segment.46

Ideally, marketers should be able to define segments so precisely that they can of-
fer products that exactly meet the unique needs of each individual or firm. This level of
concentration does occur (we hope) in the case of personal or professional services we get
from doctors, lawyers, and hairstylists. A customized marketing strategy also is common
in industrial contexts where a manufacturer often works with one or a few large clients and
develops products that only these clients will use.

Of course, in most cases this level of segmentation is neither practical nor possible
when mass-produced products such as computers or cars enter the picture. However,

advances in computer technology, coupled with the
new emphasis on building solid relationships with
customers, have focused managers’ attention on de-
vising new ways to tailor specific products and the
messages about them to individual customers. In fact,
some entrepreneurs are working on the possibility of
using new 3-D printing technology to let you print your
own car.47 This is an extreme example of the growing
trend of mass customization, where a manufacturer
modifies a basic good or service to meet an individual’s
specific needs.48 Levi Strauss was a pioneer in this area.
Company researchers found that 80 percent of women
around the world fall into three distinct body shapes,
so it’s physically impossible to offer a one-size-fits-all
product. The Levi’s CURVE ID program employs an
interactive custom fit experience to tell a customer
whether she should buy a Slight Curve, Demi Curve, or
Bold Curve version of the jeans.49

concentrated targeting strategy
Focusing a firm’s efforts on offering one or more
products to a single segment.

customized marketing strategy
An approach that tailors specific products
and the messages about them to individual
customers.

mass customization
An approach that modifies a basic good or
service to meet the needs of an individual.

Blacksocks practices a highly concentrated targeting strategy.

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New 3-D printing technology allows consumers to literally print their own car.

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Step 3: Positioning
The final stage of developing a target marketing strategy is to provide
consumers who belong to a targeted market segment with a good or
service that meets their unique needs and expectations. Positioning
means developing a marketing strategy to influence how a particular
market segment perceives a good or service in comparison to the com-
petition. A key word in this definition is perceives—that is, positioning
is in the eye of the beholder.

A firm may truly believe that its customers think about its offer-
ing in a certain way, but unless market research bears this out, what

the marketer “thinks” doesn’t matter as it is trumped by what the consumer perceives. To
position a brand, marketers must clearly understand the criteria target consumers use to
evaluate competing products and then convince them that their product, service, or orga-
nization will meet those needs. In addition, the organization has to come up with a plan to
communicate this position to its target market.

Positioning happens in many ways. Sometimes it’s just a matter of making sure
that cool people use your product—and that others observe them doing this. After find-
ing out that a close friend was flying to Los Angeles to audition for the film Any Given
Sunday, the president of the high-performance sportswear company Under Armour sent
along with him a bunch of free samples of its athletic wear to give to the film’s casting
director as a gift. The director liked the quality of the clothes so much that he gave them
to the wardrobe company the filmmakers hired, and they also really liked the clothes.
The next thing you know, the movie (starring Al Pacino and Jamie Foxx) featured both
the actors wearing Under Armour clothes on screen—and there was even a scene in
the film when Jamie Foxx undressed in the locker room with a clear shot of the Under

positioning
Developing a marketing strategy to influence
how a particular market segment perceives
a good or service in comparison to the
competition.

7.4
OBJECTIVE
Recognize how mar-
keters develop and
implement a position-
ing strategy.

(pp. 221–225)

Ethical/Sustainable Decisions
in the Real World
Candy companies have received scrutiny in the past for advertising
directly to children, given the widely held belief that children are more
impressionable and more susceptible to advertising than older groups.
Recent massive publicity about childhood obesity, diabetes, and dental
impacts because of too much sugar haven’t helped matters any for candy
marketers.

In 2007 the Children’s Food and Beverage Advertising Initiative
(CFBAI) was launched to help move the food and beverage industries
toward creating advertising messages for children (defined as individu-
als under the age of 12) that promote healthier products and generally
healthier nutritional habits.50 Despite the launch of this initiative and
some candy companies pledging to reduce or altogether eliminate their
marketing efforts directed toward children, a research study found that
between 2008 and 2011 children’s exposure to ads for candy actually
went up 74 percent along with evidence that candy ads children were
exposed to peripherally (that is, not specifically directed to a child) also
increased.51

Determining whether an advertisement is directed to a particular segment
is a somewhat subjective exercise, which creates word games between adver-
tisers and regulators as to whether a particular advertisement is “directed” to
(in this case) children. The vagueness of this situation also potentially provides
room for unscrupulous marketers to make a pledge to do one thing when in
reality they plan on doing another without technically failing to honor their
pledge (whether this is true in the candy company example is for them to say).

In 2016, soon after Easter passed, a large number of major candy
companies announced that they would no longer advertise directly
to children. These companies include the Ferrara Candy Company,
Ghirardelli Chocolate Company, Jelly Belly Candy Company, Just Born
Quality Confections, Promotion in Motion
Inc., and the R.M. Palmer Company. This
announcement was quickly praised by candy
industry oversight groups.52 But the extent
to which this announced decision actually
reduces the amount of candy-related market-
ing directed at children (as well as peripheral
exposure of candy advertising) remains to
be seen.

Ripped from the Headlines

ETHICS CHECK:

Should candy com-
panies be allowed to
advertise directly to
children?

YES NO

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Armour logo on his jock strap. After the movie’s release, hits on Under Armour ’s
website spiked, and, as they say, the rest is history.53 More recently Under
Armour was able to sign NBA phenom Stephen Curry to an endorsement deal
that has benefitted the brand enormously as a result of Curry’s popularity and
meteoric success on the court. The company’s CEO in a recent earnings call spoke
about (among other things) how the footwear division saw a 95 percent increase
in sales from the same period in the prior year. The reason he gave for the signifi-
cant increase in sales within footwear: Stephen Curry’s popularity. One analyst
on Wall Street believes Curry adds $14 billion to the value of Under Armour ’s
outstanding shares of stock.54

Steps in Positioning
Figure 7.5 shows the steps marketers go through to decide just how to po-

sition their product or service: analyze competitors’ positions, offer a good or
service with a competitive advantage finalize the marketing mix, and evaluate
responses and modify as needed. Let’s take a closer look at each of these posi-
tioning steps.

Step 1: Analyze Competitors’ Positions

The first stage is to analyze competitors’ positions in the marketplace. To develop
an effective positioning strategy, marketers must understand the current lay of the

land. What competitors are out there, and how does the target market perceive them?
Aside from direct competitors in the product category, are there other goods or services
that provide similar benefits?

Sometimes the indirect competition can be more important than the direct, especially
if it represents an emerging consumer trend. For years, McDonald’s developed posi-
tioning strategies based only on its direct competition, which it defined as other large
fast-food hamburger chains (translation: Burger King and Wendy’s). McDonald’s failed
to realize that in fact many indirect competitors fulfilled consumers’ needs for a quick,
tasty, convenient meal—from supermarket delis to frozen microwavable single-serving
meals to call-ahead takeout from full-service restaurants like Applebee’s, T.G.I. Friday’s,
Outback, and Chili’s—all of whom have convenient curbside service instead of backed-
up drive-through lines. Ultimately, McDonald’s began to understand that it must react to
this indirect competition by serving up a wider variety of adult-friendly food and shoring
up lagging service. These days the company also offers its McCafé concept, with coffee
products aimed squarely at taking business away from morning mainstays Starbucks and
Dunkin’ Donuts, along with a tasty breakfast menu all day long to compete in a brand-
new space.

Step 2: Define Your Competitive Advantage

The second stage is to offer a good or service with a competitive advantage to provide a
reason why consumers will perceive the product as better than the competition. Toward
this end, a positioning statement can help the company frame internally how a product is
positioned so that any associated marketing communication remains focused on articulat-
ing to consumers the specific value offered by a product. Positioning statements typically
include the segment(s) to which the product is targeted, the most important claim (dif-
ferentiator) to be attributed to the product for the targeted segment(s), and the most im-
portant piece of evidence that supports the claim made about the product. If the company
offers only a “me-too product,” it can induce people to buy for a lower price. Other forms
of competitive advantage include offering a superior image (Giorgio Armani), a unique
product feature (Levi’s 501 button-fly jeans), better service (Cadillac’s roadside assistance

positioning statement
An expression of a product’s positioning that
is internally developed and maintained in
order to support the development of marketing
communication that articulates the specific
value offered by a product.

Step 1: Analyze Competitors’ Positions

Step 2: Define Your Competitive
Advantage

Step 3: Finalize the Marketing Mix

Step 4: Evaluate Responses and
Modify as Needed

Figure 7.5 Process | Steps in Positioning

Four key steps comprise the decision-making process
in positioning.

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program), or even better-qualified people (the legendary salespeople at Nordstrom’s de-
partment stores).

Step 3: Finalize the Marketing Mix

Once they settle on a positioning strategy, the third stage for marketers is to finalize the
marketing mix as they put all the pieces into place. The elements of the marketing mix
must match the selected segment. This means that the good or service must deliver ben-
efits that the segment values, such as convenience or status. Put another way, it must add
value and satisfy consumer needs (sound familiar?). Furthermore, marketers must price
this offering at a level these consumers will pay, make the offering available at places they
are likely to go, and correctly communicate the offering’s benefits in locations where these
targets are likely to take notice. In other words, the positioning strategy translates into the
organization’s marketing mix that we discussed in Chapter 1.

Beginning with Chapter 8, all the remaining chapters in the book provide you with
the details of developing strategies for each element of the marketing mix: product, price,
physical distribution, and promotion. The sum of these individual marketing mix strate-
gies results in the overall positioning strategy for your offering.

Step 4: Evaluate Responses and Modify as Needed

In the fourth and final stage, marketers evaluate the target market’s re-
sponses so they can modify strategies if necessary. Over time, the firm
may find that it needs to change which segments it targets or even alter a
product’s position to respond to marketplace changes. Consider this clas-
sic example: Both TGI Fridays and Jack Daniel’s are venerable brands in
separate market spaces. But like peanut butter and chocolate in the case of
a Reese’s peanut butter cup, Fridays and Jack Daniel’s partnered to create
a set of new menu items like the Jack Daniel’s® Burger which repositioned
TGIF from “your father’s restaurant” to a hipper place for the younger ur-
ban crowd.

A change in positioning strategy is repositioning, and it’s fairly
common to see a company try to modify its brand image to keep up
with changing times. Take as an example Charles Schwab, which used
to be pegged primarily as a self-service stock brokerage. Competition in
the budget broker business, especially from online brokers, prompted
Schwab’s repositioning to a full-line, full-service financial services firm
that still pays attention to frugal prices for its services. Think of it this
way: There’s not much value Schwab can add as one of a dozen or more
online providers of stock trades. In that environment, customers simply
will view the firm as a commodity (i.e., just a way to buy stocks) with
no real differentiation. Schwab still has its no-frills products, but the real
growth in sales and profits comes from its expanded product lines and
provision of more information—both online and through personal sell-
ing—that warrant higher fees and build deeper customer relationships.
Repositioning also occurs when a marketer revises a brand thought to be
inextricably past its prime. Sometimes these products rise like a phoenix
from the ashes to ride a wave of nostalgia and return to the marketplace
as retro brands—venerable brands like Oxydol laundry detergent, Breck
Shampoo, Ovaltine cereal, Frontier airlines, and Tab cola all are examples
of brands that were nearly forgotten but got a new lease on life.55

Three guys built a powerful community through Facebook called the
SURGE Movement to bring back the carbonated beverage that had some

repositioning
Redoing a product’s position to respond to
marketplace changes.

retro brands
A once-popular brand that has been revived
to experience a popularity comeback, often by
riding a wave of nostalgia.

The SoBe Beverage Company started in Miami’s South Beach (hence
the name “So-Be”) in 1996 when the founders saw a lizard on the
art deco façade of the Abbey Hotel, and the rest is history. SoBe has
masterfully executed the process of segmentation, target marketing,
and positioning you’ve read about in this chapter and today boasts
an amazing brand and product line that appeals to a definitive set of
demographic/psychographic targets.

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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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popularity in the 1990s but had been out of production for over a decade. The group
amassed a large following of active supporters (more than 300,000 people support the
Facebook Cause page) and worked fervently to let the Coca-Cola Company, the creators
of SURGE, know about their love for the product. The SURGE Movement’s efforts ulti-
mately were successful and now the three founders of the movement are working hard
to make sure the effort doesn’t lose any steam and that SURGE remains a viable product
into the future.56

Bring a Product to Life: Brand Personality
In a way, brands are like people: We often describe them in terms of personality traits. We
may use adjectives such as cheap, elegant, sexy, or cool when we talk about a store, a per-
fume, or a car. That’s why a positioning strategy often tries to create a brand personality
for a good or service—a distinctive image that captures its character and benefits. An ad-
vertisement for Elle, an amazingly chic fashion magazine for women, proclaimed, “She is
not a reply card. She is not a category. She is not shrink-wrapped. Elle is not a magazine.
She is a woman.”

One of the more effective ways to give a brand a personality in the minds of consum-
ers is to engage in deliberate marketing actions that make the brand seem more human.
The phenomenon of attributing to a brand human characteristics is known as brand an-
thropomorphism and it can be seen in action when, for instance, a brand’s Twitter account
makes a quirky comment in reply to someone’s tweet (that is, “humanizing the brand
through a response”) or through the interactions of a brand’s mascot in a commercial. The
Pillsbury Doughboy, who has been active in advertising for more than 50 years, is a prime
example of the latter with his friendly demeanor and the trademark giggle he lets out
when poked in the belly that help shape consumer perceptions of the brand.57 We’ll talk a
lot more about brands in Chapter 9.

Products as people? It seems funny to say, yet marketing researchers find that most
consumers have no trouble describing what a product would be like “if it came to life.”
People often give clear, detailed descriptions, including what color hair the product would
have, the type of house it would live in, and even whether it would be thin, overweight, or
somewhere in between.58 If you don’t believe us, try doing this yourself.

Part of creating a brand personality is to develop an identity for the product that the
target market will prefer over competing brands. How do marketers determine where their
product actually stands in the minds of consumers? One solution is to ask consumers what
characteristics are important and how competing alternatives would rate on these attri-
butes, too. Marketers use this information to construct a perceptual map—a vivid way to
construct a picture of where products or brands are “located” in consumers’ minds.

For example, suppose you want to develop an idea for a new publication that will ap-
peal to American women in their twenties. You might construct a perceptual map of how
these target customers perceive the magazines out there now to help you develop an idea
for a new publication they would like. After you interview a sample of female readers,
you might identify two key questions women ask when they select a magazine: (1) Is it
“traditional,” that is, oriented toward family, home, or personal issues, or is it “fashion-
forward,” oriented toward personal appearance and fashion? (2) Is it for “upscale” women
who are older and established in their careers or for relatively “downscale” women who
are younger and just starting out in their careers?

The perceptual map in Figure 7.6 illustrates how these ratings might look for
a set of major women’s magazines. The map provides some guidance as to where you
might position your new magazine. You might decide to compete directly with either
the cluster of “service magazines” in the lower left or the traditional fashion magazines

brand personality
A distinctive image that captures a good’s or
service’s character and benefits.

brand anthropomorphism
The assignment of human characteristics and
qualities to a brand.

perceptual map
A technique to visually describe where brands
are “located” in consumers’ minds relative to
competing brands.

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Service Fashion

Upscale

Downscale

Architectural
Digest

Self
Vogue

Cosmopolitan

Glamour

Harper’s
Bazaar

Seventeen
Redbook

Woman’s
World

Family Circle

Ladies’ Home Journal

Figure 7.6 Snapshot | Perceptual Map
Perceptual mapping allows marketers to identify consumers’ perceptions of their brand in
relation to the competition.

MyMarketingLab™
Go to mymktlab.com to complete the problems marked with this icon
as well as additional Marketing Metrics questions only available in
MyMarketingLab.

in the upper right. In this case, you would have to determine what benefits your new
magazine might offer that these existing magazines do not. Media firm Condé Nast, for
example, positions Allure to compete against other fashion magazines by going into more
depth than they do on beauty issues, such as the mental, physical, and emotional dan-
gers of cosmetic surgery.

You might try to locate an unserved or underserved area in this perceptual map. There
may be room for a magazine that targets “cutting-edge” fashion for college-age women.
A neglected segment is the “Holy Grail” for marketers: With luck, they can move quickly
to capture a segment and define the standards of comparison for the category. This tactic
paid off for Chrysler, which first identified the minivan market for soccer moms; JetBlue,
which found a spot for low fares and high tech without the poor-boy service attitude and
cattle-call boarding procedure of other budget airlines; and Liz Claiborne, which pioneered
the concept of comfortable, “user-friendly” clothing for working women. In the magazine
category, perhaps Marie Claire comes closest to this position.

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Objective Summary Key Terms Apply
Chapter 7

Study Map

7.1 Objective Summary (p. 204)
Identify the steps in the target marketing
process.
Marketers must balance the efficiency of mass marketing,
serving the same items to everyone, with the effectiveness of
offering each individual exactly what he or she wants. To ac-
complish this, instead of trying to sell something to everyone,
marketers follow these steps: (1) select a target marketing
strategy, in which they divide the total market into different
segments based on customer characteristics; (2) select one or
more segments; and (3) develop products to meet the needs
of those specific segments.

Key Terms
market fragmentation, p. 204

target marketing strategy, p. 204

7.2 Objective Summary (pp. 205–217)
Understand the need for market segmentation
and the approaches available to do it.
Market segmentation is often necessary in today’s mar-
ketplace because of market fragmentation—that is, the
splintering of a mass society into diverse groups due to
technological and cultural differences. Most marketers can’t
realistically do a good job of meeting the needs of everyone,
so it is more efficient to divide the larger pie into slices in
which members of a segment share some important charac-
teristics and tend to exhibit the same needs and preferences.
Marketers frequently find it useful to segment consumer
markets on the basis of demographic characteristics, in-
cluding age, gender, family life cycle, social class, race or
ethnic identity, and place of residence. A second dimension,
psychographics, uses measures of psychological and social
characteristics to identify people with shared preferences
or traits. Consumer markets may also be segmented on the
basis of how consumers behave toward the product, for
example, their brand loyalty, usage rates (heavy, moder-
ate, or light), and usage occasions. B2B markets are often
segmented on the basis of industrial demographics, type of
business based on the North American Industry Classification
codes, and geographic location.

Key Terms
segmentation, p. 205

segmentation variables, p. 205

demographics, p. 206

generational marketing, p. 206

Generation Z, p. 207

digital natives, p. 207

Generation Y (millennials), p. 207

Generation X, p. 207

baby boomers, p. 208

metrosexual, p. 209

buying power, p. 210

content marketing, p. 211

cultural diversity, p. 212

geographic segmentation, p. 213

geographic information system (GIS), p. 213

geodemography, p. 213

geotargeting, p. 214

micromarketing, p. 214

psychographics, p. 214

VALS™, p. 215

gamer segment, p. 215

badge, p. 215

behavioral segmentation, p. 215

80/20 Rule, p. 215

usage rate, p. 216

long tail, p. 216

usage occasions, p. 216

organizational demographics, p. 217

7.3 Objective Summary (pp. 217–220)
Explain how marketers evaluate segments and
choose a targeting strategy.
To choose one or more segments to target, marketers exam-
ine each segment and evaluate its potential for success as

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7.4 Objective Summary (pp. 221–225)
Recognize how marketers develop and imple-
ment a positioning strategy.
After marketers select the target market(s) and the overall
strategy, they must determine how they wish customers to
perceive the brand relative to the competition—that is, should
the brand be positioned like, against, or away from the compe-
tition? Through positioning, a brand personality is developed.
Marketers can compare brand positions by using such research
techniques as perceptual mapping. In developing and imple-
menting the positioning strategy, firms analyze the competitors’
positions, determine the competitive advantage offered by
their product, tailor the marketing mix in accordance with the
positioning strategy, and evaluate responses to the marketing
mix selected. Marketers must continually monitor changes in
the market that might indicate a need to reposition the product.

Key Terms
positioning, p. 221

positioning statement, p. 222

repositioning, p. 223

retro brands, p. 223

brand personality, p. 224

brand anthropomorphism, p. 224

perceptual map, p. 224

a target market. Meaningful segments have wants that are
different from those in other segments, can be identified,
can be reached with a unique marketing mix, will respond
to unique marketing communications, are large enough
to be profitable, have future growth potential, and pos-
sess needs that the organization can satisfy better than the
competition.

After marketers identify the different segments, they
estimate the market potential of each. The relative attractive-
ness of segments also influences the firm’s selection of an
overall marketing strategy. The firm may choose an undif-
ferentiated, differentiated, concentrated, or custom strategy
based on the company’s characteristics and the nature of the
market.

Key Terms
targeting, p. 217

target market, p. 217

segment profile, p. 218

undifferentiated targeting strategy, p. 218

differentiated targeting strategy, p. 219

concentrated targeting strategy, p. 220

customized marketing strategy, p. 220

mass customization, p. 220

7-9. Explain the differences between undifferentiated, dif-
ferentiated, concentrated, and customized marketing
strategies. What is mass customization?

7-10. What is product positioning?
7-11. What do marketers mean by creating a brand person-

ality? What examples can you come up with of uses of
brand anthropomorphism?

7-12. How do marketers use perceptual maps to help them
develop effective positioning strategies?

Activities: Apply What You’ve Learned

7-13. Creative Homework/Short Project You are an entrepre-
neur who is designing a new line of boutique hotels
located along Florida’s coastlines. Each of the 75 guest
rooms in each hotel will offer upscale decor, Wi-Fi,

Concepts: Test Your Knowledge

7-1. What is market fragmentation, and what are its conse-
quences for marketers?

7-2. What is a target marketing strategy?
7-3. What is market segmentation, and why is it an impor-

tant strategy in today’s marketplace?
7-4. List and explain the major demographic characteristics

frequently used in segmenting consumer markets.
7-5. Explain the process of consumer psychographic seg-

mentation.
7-6. What is behavioral segmentation?
7-7. What are some of the ways marketers segment B2B

markets?
7-8. List the criteria marketers use to determine whether a

segment may be a good candidate for targeting.

MyMarketingLab™
Go to mymktlab.com to watch this
chapter’s Rising Star video(s) for career advice
and to respond to questions.
Chapter Questions and Activities
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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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a mini bar stocked with high-end snacks, premium
beers, and top label liquors for a nightly rate of $299.
The hotels will have a spa, an on-site restaurant and a
separate full-service bar that features local musicians.
Describe in detail the demographics—age, gender,
family life cycle, income and social class, ethnicity, and
place of residence—of your target customer.

7-14. Creative Homework/Short Project As the marketing
director for a company that is planning to enter the
B2B market for photocopy machines, you are attempt-
ing to develop an overall marketing strategy. You have
considered the possibility of using mass-marketing,
concentrated marketing, differentiated marketing, and
custom marketing strategies.
a. Prepare a summary explaining what each type of

strategy would mean for your marketing plan in
terms of product, price, promotion, and distribu-
tion channel.

b. Evaluate the desirability of each type of strategy.
c. Describe your final recommendations for the best

type of strategy.
7-15. In Class, 10–25 Minutes for Teams To better market the

university to potential students, you and your class-
mates have been asked to create a segment profile
of the typical college student at your school. Write up
a descriptive segment profile, or “persona,” of the
targeted consumer. Share your description with the
class.

7-16. In Class, 10–25 Minutes for Teams As an account ex-
ecutive for a marketing consulting firm, your newest
client is a university—your university. You have been
asked to develop a positioning strategy for the univer-
sity. With your team, develop an outline of your ideas,
including the following:
a. Who are your competitors?
b. What are the competitors’ positions?
c. What target markets are most attractive to the uni-

versity?
d. How will you position the university for those seg-

ments relative to the competition?
7-17. For Further Research (Individual): A geographic infor-

mation system (GIS) combines a geographic map with
digitally stored data about the consumers in a particu-
lar geographic area. Using the web, find an example
or case study of a business or nonprofit that is using
a GIS such as Google Earth to generate market in-
formation by location. Write a short summary of this
example or case study and present this summary to
your class.

7-18. For Further Research (Individual) Select any consumer
packaged goods company’s product that has been
around for at least two decades and find at least
five print advertisements from throughout that time
frame. From the marketing communication content,
how has the product’s target customers and position-
ing changed over time and why do you believe these
changes have occurred? If the product’s target cus-
tomers or positioning have not changed, what might

explain the product’s ability to remain the same in its
targeting and positioning?

7-19. Creative Homework/Short Project Imagine you are the
marketing director for a new soft drink brand called
Verve and that you have been charged with determin-
ing what kind of brand personality the product should
have in order for it to have broad appeal with members
of Generation Z. Describe the desired brand person-
ality and identify specific elements of the marketing
mix (product, place, price, promotion) that should be
implemented to assist in establishing the desired brand
personality.

Concepts: Apply Marketing Metrics

When it comes to metrics, good data about the characteristics
of the various consumer segments that you may wish to ulti-
mately target is critical because target marketing is ultimately a
strategic investment of resources in the segments that appear
to have the best return on investment. In this chapter, we men-
tioned that VALS™ is a well-known approach to psychographic
segmentation.

7-20. To make the power of the psychographic technique
and resulting information for decision making come
alive, let’s find out your own VALS™ category.
a. Go to the VALS™ website (either Google it or go

directly to www.strategicbusinessinsights.com).
b. Click on “Take the VALS™ Survey.” Complete all

the questions and click SUBMIT to view your results.
c. What is your VALS™ type? Review the information

on the website that describes it (found under the
tabs About VALS™/VALS™ Types) along with the
other VALS™ types.

d. What is your reaction to learning your own VALS™
type? Are you surprised with the result or was it
consistent with what you would have expected?
Why or why not?

e. What insights does the knowledge of your VALS™
type provide relative to your own consumer behavior?

Choices: What Do You Think?

7-21. Ethics Some critics of marketing have suggested that
market segmentation and target marketing lead
to an unnecessary proliferation of product choices
that wastes valuable resources. These critics sug-
gest that if marketers didn’t create so many differ-
ent product choices, there would be more resources
to feed the hungry and house the homeless and
provide for the needs of people around the globe.
Are the results of segmentation and target market-
ing harmful or beneficial to society as a whole?
Should firms be concerned about these criticisms?
Why or why not?

7-22. Critical Thinking One of the criteria for a usable mar-
ket segment is its size. This chapter suggested that

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a. Manufacturers of alcohol and tobacco products
have been criticized for targeting unwholesome
products to certain segments of the market—the
aged, ethnic minorities, the disabled, and others.
Do you view this as a problem? Should a firm use
different criteria in targeting such groups? Should
the government oversee and control such market-
ing activities?

7-27. Ethics Gamification was discussed in Chapter 6. For
specific segments of a market, a gamification approach
might help elicit a desired behavior from consumers,
and of course in many cases the desired behavior is an
increase in consumption of the related product. When
a product is generally associated with potential health
problems if consumed in large quantities (e.g., alcohol,
sugar) should a marketer be allowed to engage the
consumer in gamification activities or similar “fun” ap-
proaches that encourage or induce excessive consump-
tion of the product?

7-28. Critical Thinking Marketers commonly ask celebrities
to endorse products, but tying a brand to a celebrity
can come with risks if that celebrity falls out of favor
with the public as the result of a something they do
or say that is perceived negatively. How would you
determine if the signing of a celebrity to an endorse-
ment deal is worth the risk? What would you want to
know to make that determination and reduce the risk
potential?

Miniproject: Learn by Doing

This miniproject will help you to develop a better understand-
ing of how firms make target marketing decisions. The project
focuses on the market for men’s athletic shoes.

a. Gather ideas about different dimensions useful for seg-
menting the men’s athletic shoes market. You may use
your own ideas, but you probably will also want to ex-
amine advertising and other marketing communications
developed by different athletic shoe brands.

b. Based on the dimensions for market segmentation that
you have identified, develop a questionnaire and conduct
a survey of consumers. You will have to decide which
questions should be asked and which consumers should
be surveyed.

c. Analyze the data from your research and identify the dif-
ferent potential segments.

d. Develop segment profiles that describe each potential seg-
ment.

e. Generate several ideas for how the marketing strat-
egy might be different for each segment based on the
profiles.

f. Define your competitive advantage.
7-29. Develop a presentation (or write a report) outlining

your ideas, your research, your findings, and your mar-
keting strategy recommendations.

to be usable, a segment must be large enough to be
profitable now and in the future and that some small
segments get ignored because they can never be
profitable. So how large should a segment be? How
do you think a firm should go about determining if a
segment is profitable? Have technological advances
made it possible for smaller segments to be profit-
able? Do firms ever have a moral or ethical obliga-
tion to develop products for small, unprofitable seg-
ments? When?

7-23. Ethics Marketers are in business to make a profit, but
they also have an ethical obligation not to take advan-
tage of consumers, especially disadvantaged consum-
ers like those at the bottom of the pyramid. Would
you consider it ethical to sell mosquito nets in Africa
to prevent the spread of malaria? Would you consider
it ethical to sell Coca-Cola or Pepsi to consumers in
rural India? Why or why not? Is there a line between
what is ethical to sell and what is not? How would you
describe that line?

7-24. Critical Thinking Sometimes marketers will develop
strategies to target multiple social class segments with
the same product by offering it at different prices.
What are some examples of products or brands that
use this strategy and how do they accomplish it? Are
there any potential risks to taking this approach with
specific products or brands and what might make some
products or brands more susceptible to these kinds of
risks?

7-25. Critical Thinking In this chapter, you learned about the
use of geotargeting and its capability to more pre-
cisely provide consumers with benefits such as pro-
motions that are especially relevant and impactful to
a particular group. Could geotargetting backfire for
a company? What might be some examples where
geotargetting has negative reactions or consequenc-
es and what might be the impact on the company’s
image?

7-26. Critical Thinking A few years ago, Anheuser-Busch
Inc. created a new division dedicated to marketing to
Hispanics and announced it would boost its ad spend-
ing in Hispanic media by two-thirds to more than
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million, three-year ad package with Spanish-language
broadcaster Univision. But Hispanic activists immedi-
ately raised public health concerns about the beer ad
blitz on the grounds that it targets a population that
skews young and is disproportionately likely to abuse
alcohol. Surveys of Hispanic youth show that they are
much more likely to drink alcohol, get drunk, and en-
gage in binge drinking than their white or black peers.
A senior executive at Anheuser-Busch responded, “We
would disagree with anyone who suggests beer bill-
boards increase abuse among Latino or other minority
communities. It would be poor business for us in to-
day’s world to ignore what is the fastest-growing seg-
ment of our population.”

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Marketing in Action Case Real Choices at Sprig
What’s for dinner? Sprig would like to play a part in a health-
conscious customer’s answer to that question. Sprig is an on-
demand delivery restaurant that offers balanced meals which
are fully prepared and delivered in 15 to 20 minutes. The
company focuses on using the freshest ingredients to create
innovatively delicious food that supports a healthy lifestyle. Its
target market includes those who have busy schedules and
desire meals that include servings of fruits, vegetables, pro-
teins, and other nutrients. Sprig’s website claims, “We use the
best ingredients to create dishes that are high on flavor and
low on butter, oils, and sugar.” Customers have a choice of
ordering meals via the Internet or by an app.

CEO Gagan Biyani realized as he worked at ride-sharing
company Lyft that when he ordered on-demand meal delivery
he was relying way too much on unhealthy options like pizza.
So in 2013 he created a company that gives the health-con-
scious consumer better choices without compromising speed
or convenience. Jessica Entzel, executive R&D chef and Biyani’s
first employee, manages Sprig’s menu development. She
teams with Nate Keller, a former executive chef for Google,
who develops relationships with local farmers and manages
the company’s sustainability efforts. Keller has a great deal of
freedom and a large budget to experiment with recipes and
then test them with a host of eager tasters. Sample menu se-
lections include grilled jerk chicken with habanero slaw, beef
keema with roasted red potatoes and cabbage, and truffled
mac and cheese with cauliflower béchamel.

Sprig uses data continuously collected from customers to
refine the menu and ensure consistent delivery of desirable,
innovative meals that offer high value. Entzel studies customer
feedback on each item to see if it meets and exceeds customer
expectations. When the ratings are not as expected, she digs
deeper into the responses to discover ways to fix the problem
before including that item on the menu again. She also makes
sure the presentation of the meal is first-rate, a difficult task
to accomplish consistently in on-demand delivery. Hence, the
meal development process takes into account how to trans-
port the food without it arriving to the customer as an unat-
tractive mess.

The on-demand delivery segment of the restaurant in-
dustry is developing and attracting attention from many new
players. Munchery delivers fresh-food entrees, sides, des-
serts, drinks, and kids’ meals in San Francisco, New York, Los
Angeles, and Seattle. It offers ready-to-cook meals that are
delivered with directions on how to successfully complete the
dish. Postmates operates a network of local couriers to deliver
meals through a service called Pop that promises food delivery
in 15 minutes or less. Pop is fast because it eliminates the
pickup leg. Rather than spending time traveling to a specific
merchant location or waiting for the food to be prepared,
Postmates drivers who participate in Pop carry an inventory of
freshly made items ready to drop off immediately. Even Uber is
in the market with UberEats, its own on-demand meal delivery
service that uses existing Uber technology and customer rela-
tionships for competitive advantage.

So what’s next for Sprig? Are they on the right track
targeting only the smaller health-conscious segment of on-de-
mand delivery? Biyani expects the on-demand delivery market
to experience shake-out among competitors similar to what
was experienced by the search engine, social media, and other
tech markets—that is, a shake-out of initial providers with only
a few remaining competitors today. How does Sprig become
one of those few that survives?

You Make the Call
7-30. What is the decision facing Sprig?
7-31. What factors are important in understanding this deci-

sion situation?
7-32. What are the alternatives?
7-33. What decision(s) do you recommend?
7-34. What are some ways to implement your recommenda-

tion?

Sources: Based on Harry McCracken, “The R&D behind Meal Delivery Startup Sprig’s New Recipes,” Fast Company (January 27, 2016), http://
www .fastcompany.com/3055772/the-rd-behind-meal-delivery-startup-sprigs-new-recipes (accessed April 21, 2016); “Homepage,” Sprig,
https://www.sprig.com/#/ (accessed April 21, 2016); Melia Robinson, “This Idealistic Food Startup Could Change the Way We Eat—If It
Survives,” Business Insider (April 21, 2016), http://www.techinsider.io/sprig-food-delivery-on-demand-startup-2016-4 (accessed
April 21, 2016); http://blog.postmates.com/post/130627727422/poprocks (accessed April 29, 2016).

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7-35. Creative Homework/Short Project. Assume that a small regional microbrew-
ery has hired you to help them with their target marketing. They are pretty
unsophisticated about marketing—you will need to explain some things
to them and provide ideas for their future. In the past, the microbrewery
has simply produced and sold a single beer brand to the entire market—a
mass-marketing strategy. As you begin your work, you come to believe that
the firm could be more successful if it developed a target marketing strategy.
Write a memo to the owner outlining the following:
a. The basic reasons for doing target marketing in the first place
b. The specific advantages of a target marketing strategy for the micro-

brewery
c. An initial “short list” of possible target segment profiles

7-36. Creative Homework/Short Project. You have been a contributing author to sev-
eral marketing newsletters, and you have been asked to submit a one-page
article on market segmentation. First, describe the need for market segmen-
tation and then, in turn, discuss the various approaches marketers can take,
including the advantages of each approach.

MyMarketingLab™
Go to mymktlab.com for Auto-graded writing questions as well as the following
Assisted-graded writing questions:
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Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson.
Copyright © 2018 by Pearson Education, Inc.
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