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Advanced Marketing -
Marketing Strategy and Competitive Positioning
MMU – Cyberjaya
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Day 3 – 10th July 2011Agenda:
9.30-11.00: Integrated Case analysis and Discussion (PECHA
KUCHA)
11.20am – 1pm: Segmentation and Positioning
principles1-2pm : Lunch2-3.00: Selecting target markets3.15-5.30pm: Pfizer case (A) discussion and case Presentation and briefing on OTWC next presentation.
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COMPETITIVE POSITIONING AND SEGMENTATION
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DEFINITIONS
COMPETITIVE POSITIONING – how customers perceive the alternative offerings on the market, compared with each other.
SEGMENTATION – firms dividing the market into groups of similar customers. Why? And how?
Linked by customer needs ultimately .
Steps in market segmentation, targeting and positioning
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MARKET SEGMENTATION
MARKET TARGETING
MARKETPOSITIONING
Identify bases for segmenting the market
Develop profiles of resulting segments
Develop measures of segment attractiveness
Select target market (s)
Develop positioning for each target segment
Develop marketing mix for each target segment
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DEFINITION - SegmentationMarket segmentation involves viewing a heterogeneous market as a number of smaller homogeneous markets , in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants (Smith 1956, quoted in Dibb 2001)
father of market segmentation is widely considered to be Wendell Smith (1956), who proposed market segmentation as an alternative to product differentiation.
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Market segmentation
‘Segmentation helps to homogenize market heterogeneity’ (Dibb, Stern, & Wensley, 2002, p. 113)
a recognition of heterogeneity in demand.
• Different consumers/groups of consumers or types of
consumers have needs and preferences (benefits sought,
purchasing behaviour, pricing structure and methods)
• Thus, different groups will respond differently to marketing
activities (marketing mix, promotions, branding etc)
• Main issue: to deliver winning propositions to customers.
(based on what customers value)
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IMPORTANCE OF SEGMENTATION
“correct market definition and market segmentation lie at the heart of successful marketing. They also lie at the heart of successful market research” (Prof. Malcolm Macdonald, (2010) Existentialism – a school of thought based on a conception
of the absurdity of the universe . International Journal of Market Research, Vol . 52
(4).)
An important capability in strategic marketing linked to choosing targets and positioning against alternatives to build competitive advantage.
To segment or not to segment??
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Rationale for segmentation
Consumer trends
Fragmentation in modern markets
Rise of individualism
Sophistication of technologies
Communication,
Distribution
Production
Moving towards one to one segmentation or segments of
one
LEVELS OF SEGMENTATION
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Example of segmentationLevel of competition
Product definition
Illustrative competitors
Need/want satisfied
GENERIC Health and beauty aids
Consumer product companies
Enhancement of health and beauty
Product type
Shaving equipment
Gillette, Bic Shaving
Product variant
Electric razors
Remington, Braun, Panasonic
Electric shaving…
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Segmentation requirements
1. Customers must differ from one another in some important respect. The difference is useful for segmentation purposes – meaning the differences are related to different behavior patterns or responses to marketing mix.
2. The segment must be identifiable and measurable – segment attractiveness, estimates.
3. Segment can be isolated from the other segments in the market - distinctive
Segmentation requirements
• IDENTIFIABLE – who are your customers? conceptually different – would the segments respond effectively to different marketing mix elements and programs.
• MEASURABLE – no’s – market share/ volume of purchasesthe degree to which the size, purchasing power and profits of a market segment can be measured.
• SUBSTANTIAL – should it be large?
• ACCESSIBLE – able to access (reached and served) customers , delivery/communication channels in place or in development stage.
• RELEVANT/actionable – on sound measures , not vague basis. That effective programs and strategies may be developed to serve the segments. Focusing on the segment of interest. 13
Benefits of segmentation:
• Aids target market selection (potential for sales and profits, ability and availability of company resources to service the target market)
• Allows tailored marketing mix – matched to the customer preferences and requirements
• Differentiate more effectively • Create additional utility for customers as basis for
premium price• More effective use of company resources - focused• Reduce competitive pressure – carve out a
position for company amongst competitive offerings.
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Costs of segmentation
• Segment identification – research?• Increased manufacturing costs –
different offerings• Increased marketing , stockholding,
and other costs• Need to trade off higher cost versus
higher utility
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SEGMENTATION ISSUES
1. METHODOLOGY – how to segment i.e. what base to utilize; technique to identify or evaluate segments
2. Evaluating the robustness of the segment – see segment requirements
3. Strategic segmentation issues –
4. Implementation –capabilities and characteristics of the corporation
Segmentation Bases
No single correct base One market can be segmented in
different ways
1. Review requirements and characteristics of consumers in market
2. Identify bases for segmenting the market
3. Develop profiles of resulting segments
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Categorising segmentation bases
Background customer characteristics – demographics, socio-economic characteristics, life cycle position, combination classification systems based on the above
Benefits sought
Behavioural elements – purchase behaviour – innovator, loyal, ; relationship behaviour
SEGMENTATION BASES
Behavioural• Benefits sought • Purchase
occasion• Purchase
behaviour • Usage rate• Loyalty status
Demographic
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•Gender•Age •Family lifecycle•Social class•Occupation•EthnicityDisadvantage of using demographic characteristics/ socio economic bases?-Internally homogenous -May exhibit different behavioural patterns-Motivations?-Could be related to other bases.
More direct to response or purchase and patterns, easier to
detect
Psychographic
• Lifestyle (AIO)• Personality• General attitudes,
beliefs and values
Geo-demographic
• Combination of geographic, demographic and psychographic
• Households classified by postcodes
• Generalisations made about behavior, demographics and psychographics
• Data from a no. of sources
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Requires sophisticated research methods and
analytical sophistication
Classifying residential neighbourhoods; see ACORN.
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The VALS Segmentation System (personality)(see http://www.sric-bi.com/VALS)
Primary motivation
resources
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ACORN
ACORN is a geodemographic segmentation of the UK’s population which segments small neighbourhoods, postcodes, or consumer households into 5 categories, 17 groups and 56 types.
See http://www.caci.co.uk/acorn-classification.aspx
Example: Male shopper stereotypes(personalities)
The metrosexual –affluent, urban sophisticate, who adds deeper meaning, quality and beauty to consumptions. P&G
The Maturiteen – more savvy , responsible, mature and pragmatic than previous cohorts with poinse attributed to the baby boomer parents who treat kids as equals.Technology master, adept at online research, in house shopping consultant,web dependent. SONY.
THE modern man – something in the middle. Bigger shopper than his dad – but still a sports fan. Sophisticated 20-30 year old Moisteriser and hair gel aare ordinary items.
The dad – largely ignored. In their peak earning years. Patek phillipe
The retrosexual – traditional male rejects consumerism and metro ness…. . Old Spice, Brut…
(source: Business Week, Sept 4th 2006, pg
45,54)23
Example of segmentation possibilities
2002, the british spent £ 1900 million on ready-made meals and nearly one in 3 british adults now eats a Ready- made meal more than once a week (compared to 1 in 6 In France). Convenience’ is one of the reasons but they have also become the mainstay meals for those who are generally time-poor and /or have no inclination to cook (replacing chinese/indian takeaways). Some of the higher quality chilled foods eg M&S are now promoted as equivalent to favourite restaurant or dining out experience.
NOT A SINGLE MARKET!
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Financial services segmentation in the UK
HIGH
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Financial Maturity
Perceived Knowledge
Cautious Investors
FinanciallyConfused
Capital Accumulators
Apatheticminimalists
HIGHLOW
LOW
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Segmenting Business Markets Background company characteristics –type of
industry, stage of industry development size, profit volume, power structure,.. Location, as well as what type of organisation
Benefits sought Behavioral characteristics – risk perceptions,
innovativeness, volume – decision making style… etc
Consider extent of market concentration i.e. no.of customers and then degree of product customisation
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Limitations of segmentation bases.
In 1964, in “New Criteria for Market Segmentation,” Daniel Yankelovich asserted that:
Traditional demographic traits such as age, sex, education levels, and income no longer said enough to serve as a basis for marketing strategy.
Nondemographic traits such as values, tastes, and preferences were more likely to influence consumers’ purchases than their demographic traits were.
Sound marketing strategy depended on identifying segments that were potentially receptive to a particular brand and product category.
(see Yankelovich, D. And Meer, (2006) Rediscovering market segmentation. Harvard Business Review, 84, 6, February, pp. 122–131.
Criticisms of segmentation
Do segments really exist Most fundamental difference between
customers is the benefit from use. i.e. SDL. First order segmentation and then second order.
Segments overlap Often based on attitudes but attitudes are
not the same as behaviour Are segments stable/existence over time. Segment at brand level or for product form Too much focus on consumers and not
enough focus on competitors. 28
Difficulties in segmentation Organisation structure Internal communications and
relations Corporate culture Information and reporting systems –
resource requirements and expertise Decision making processes Corporate capability Operational challenges – salesforce,
distribution, 29
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Deciding on markets and segment(s)
1. How to define the market?2. How to segment the market into
different groups of customers?3. How attractive are the alternative
market segments?4. What about firm’s competitive
position?
Factors affecting market segment attractiveness
Targeting options based on attractiveness and company capabilities
Targeting
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Targeting whole market
– massmarketing
Targeting multiple
segments (multi
segments)
Targeting One segment only (niche)
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How to select target markets?
Choice based on;Segment size, costs in differentiating, extent and durability of segment differences, stability and mutual compability of segments targets, strategic fit of segments, level and type of competition in prospective segment targets.
Segments of one: Targeting each customer.
Kara & Kaynak (1997) - markets of a single customer.
• Advances in ICT and automation in manufacturing may allow marketers to bring out affordable individualised versions of products.
• Finer segmentation – ultimate level of internal differentiation.
• Finer segmentation strategies may include micro- segmentation, and mass customization, variety seeking strategy (allowing buyers opportunities to vary their choices)
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ONE TO ONE OR SEGMENTS OF ONE- finer segmentationDibb (2001) – segments of one Technological advances enhancing the capacity to store
and manipulate diverse sets of customer information , improving segmentation opportunities
Usage of new media – allowing tracking of purchases over timeto build resource rich long term customer relationships
Segments of one – emphasizes understanding and satisfying the needs, wants and resources of individual consumers and customers rather than those of mass markets or market segments (Sheth 2000, pg 56 quoted in Dibb 2001)
Tailored services, tailored products to individuals36
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LIMITATIONS?
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Positioning
How customers perceive products/service/brands
amongst competitor ones.Can apply to:
• COMPANIES: Tesco vs Sainsbury
• PRODUCTS AND SERVICES- Nokia vs Samsung handphones
• BRANDS- Coke vs pepsi
POSITIONING
Ries and TroutPositioning is not what you do to a
product. Positioning is what you do to the mind
of the Prospect.
Positioning is the act of designing the company’s
offering and image so that they occupy a
meaningful and distinct competitive position in
the target customers’ minds.(Kotler, 1997)
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POSITIONING
StrategyHow should the product be perceived in the minds of consumers relative to competitors
OutcomeWhat customers actually think about the product?
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How to select a position ? (positioning base)
Identify your strengths Understand what chosen segment
values Consider competitor offerings How many USP’s do you have in
comparison? – are you quality, best service, efficient, responsive
Can you differentiate yourself with these USP’s?
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Keys to successful positioning:
• CLARITY – clear • CONSISTENCY - consistent• COMPETITIVENESS – superior to competitors
• CREDIBILITY – believable
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Perceptual mapping
Provide comparison of what consumers want with what is currently offered and what is ideal
Basis for comparing brands – Opp. To spot gaps in the market
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Simple Perceptual map
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Lively
Trendy
Ordinary food
Family focused
Active
Quiet
Traditional
Good Food
Not family focused
Relaxing
IDEAL RESORTBlue resort A
Yellow resort b
Positioning supermarkets in Malaysia;
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HIGH PRICE
NARROWRANGE
WIDERANGE
LOW PRICE
Grocers Village
Giant
Econsave, Mydin,Independent
Neighbourhood grocery stores
Cold storag
e
TESCO
7-Eleven, Petronas, shell, etc
convenience shops
Jusco supermarket
Isetan supermark
et
Speedmart 99
Positioning challenges
Overpositioning – believable position but too narrow
Under positioning – believable but not special
Doubtful positioning – improbable claims
Confused – not sure what it is.
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