6 Piercy Fourth Ed

8/4/2019 6 Piercy Fourth Ed

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Strategic market choices and targets:

Where to compete and where not to

Lecture 6


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A route-map for market-led strategic change

Value-basedmarketingstrategy

Newmarketing

meets

old marketing

Strategicthinking and

thinking

strategically Customer valuestrategy andpositioning

The strategic pathway

Strategicmarket choices

and targets

Market sensingand learning

strategy

Strategicrelationshipsand networks

Change strategy

Strategicgaps

Organizationand processes

for change

Implementationprocess and

internalmarketing

Part ICustomer valueimperatives

Part IIDeveloping a value-basedmarketing strategy

Part IIIProcesses for managingstrategic transformation

The Customer

is alwaysright-handed


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The strategic pathway

Market

sensingandlearningstrategy

Strategicmarketchoicesandtargets

Customervaluestrategyandpositioning

Strategicrelationshipsandnetworks

Strategic thinking andthinking strategically

Strategictransformationand strategy

implementation


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Agenda

Market definition and the competitive box

Market segmentation and targeting

Market positioning

Market choices


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Strategic market choicesand targets

Strategic marketchoices and

targets

Market definitionand the

competitive box

Marketsegmentation

andtargeting

Marketpositioning

Marketchoices


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Market definition and thecompetitive box

Markets are not fixed or static

The way they are defined should not be either

The danger is being trapped inside the competitive boxwhile the important changes occur outside the box


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The trap of the competitivebox

Conventional value propositions

Existing customer base

New customer base

The competitive box

The usual suspects

Known competitors, operatingin traditional ways with the

existing, known customer base

and competing for market sharethrough incremental innovationNew types of

competitorNew business

models

Newcustomers New

customers


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Re-thinking market boundaries is a high priority

The way management understands and defines itsmarkets is one of the most significant strategic issues

The product-customer matrix

a practical tool for looking at markets in new ways


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The product-customer matrix

CustomersProducts 1. 2. 3. 4. 5. 6. 7. Total

Market:

1.

2.

3.

4.

5.

6.

7.

Total


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Mapping market structure and change

insights into drivers of change

fundamental to looking at market segmentation andtargeting


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Mapping market structureand trends for centralheating units

ProductionOf CentralHeating

Units

IndependentDistributors

ConstructionSub-

Contractors

SmallHardwareRetailers

LargeHardwareRetailers

CommercialConstructionCompanies

(85,000 units)

DomesticCustomers

(15,000 units)Direct sales = 1,000 units

Direct sales = 10,000 units

84,000 units

5,000 units

42,000 units

42,000 units

40,000units

2,000units

7,000units

75,000 units

Production =100,000 units

Consumption =100,000 units

5,000 units


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Market segmentation

dividing market into groups of buyers who makecoherent targets, e.g., by demographics forconsumers to industry type for companies

aims to develop consistent marketing programmes forsegments with potentially different approaches foreach


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Consistency versusdifferentiation in marketsegmentation

Market segments

Marketingactions

A B C D

Product

Price

Communications

Distribution& service

Differentiatedmarketingactions acrossmarketsegments

Consistent value offerings foreach market segment


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Insightful segmentation is based on the customer benefitfrom the product or service

e.g., customer loyalty-based segmentation

e.g., customer relationship-based segmentation


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Customer loyalty-basedsegmentation

Loyalty segments Our customers Competitors customers

Satisfied stayers

Hostages

Happy wanderers

Dealers

Committed to us and rateus highly, they show little

interest in competitors

Loyal customers, but thismay only be inertia, may

be vulnerable to competitors

Show little positivecommitment, may become

interested in alternatives

Show strong preference forthe best deal on the market,

with low supplier loyalty

Committed to competitorsand rate them highly, show

little interest in us

Repeat buyers forcompetitors, but may be

interested in us

Little commitment tocompetitors, may be

interested in our offer

No commitment tocompetitors - open to

superior offers


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Customer relationship-based segmentation

Relationshipsegments Our customers Competitors customers

Relationshipseekers

Loyal buyers

Relationship

exploiters

Arms lengthtransactionalcustomers

Invest in customer relationshipmanagement and loyalty

programmes to give a closerelationship that is long term

Find ways to offer arelationship that is superior inthe customers terms to attract

away from competitors

Focus on retention throughthe value offering and not

through relationship emphasis

Emphasize superiority invalue offering and rewards

for long-term retention superiorto those of competitors

Control expenditures onloyalty incentives and provide

economic contact, e.g. throughInternet

Offer relationship-basedincentives to switch suppliers,

but control costs to allow forshort retention

Emphasize value offering andavoid relationship investments

unless can be converted toLoyal Buyers

Demonstrate superior valueoffering and lack of ties or

barriers to switching


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Broad segments and micro-segments

Strategic market segmentation

distinction between strategic and managerial issues insegmentation


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Strategic and managerialsegmentation

Strategicsegmentation

Managerialsegmentation

Corporate mission

Values

Strategic intent

Market position

Marketing plans

Resource allocation

Operationalmanagement(sales, advertising)


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Conventional views of market segmentation methodology to identify

criteria for evaluation

segmentation approach (differentiated, concentrated,undifferentiated)

An extended model of market segmentation a diagnostic framework to distinguish between strategic and

operational issues and address implementation questions


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An extended model ofmarket segmentation

Explicitness and focus

Organizationaldecision makinglevel

Explicit/external Implicit/internal

Strategic

Operational

Strategic segmentation

Managerial segmentation

Customer benefits Qualitative approach Links to mission andvision

Organizational structure Information processing Corporate culture and

history

Conventionalsegmentation bases

Quantitative approach Conventional testsand criteria of choice

Sales and distributionorganization

Advertising andpromotion

Media buying Pricing tactics


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Market segment attractiveness and internal compatibility

consider not just how attractive a segment is as atarget, but also how well it fits with companycapabilities

a significant implementation question


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Segment attractivenessand internal compatibility

Internal compatibility

Market segmentattractiveness

High Low

High

Low

Attractive segmentsthat match withcompany

capabilities

Attractive segmentsbut with poor matchwith company

capabilities

Unattractive segmentsthat do not match withcompany capabilities

Unattractive segmentsbut with match to

companycapabilities


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Market positioning

How customers compare you to the competition andwhat they decide

The logic of blue oceans and red oceans

finding spaces where there is no competition


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Market positioning

Creating new market space looking across substitute industries

looking across strategic groups within the industry

redefining the buyer group

look across to complementary products/services re-think the functional/emotional orientation of the industry

participate in shaping external trends


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Market positioning

But, will the big idea work? buyer utility

strategic pricing

business model

adoption hurdles


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Market choices

Usually there are choices which markets/segments totarget?

how do we set priorities?

Portfolio approaches compare

market/segment attractiveness (how well theopportunity fits our goals and capabilities

market position (how well we believe we can do inthis market/segment)


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Market attractivenessand position

Market attractiveness

Marketposition

High Low

Strong

Weak

Corebusiness

Peripheralbusiness

Illusionbusiness

Dead-endbusiness


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Market choices

Portfolio approach identifies core business targets with a good fit and where we can do well

peripheral business market is less attractive to us but we willtake a strong position

illusion business attractive markets where we can take only a

weak position dead-end business unattractive markets where we do badly.

Provides a basis for making investment choices

Documents

6 Piercy Fourth Ed