Slide 1

Strategic Marketing Management

MKTG 485 Week 6

May 3, 2004

Slide 2

Segment Analysis

• Best, Chapter 5 – Segmentation Strategies

– Web Depot Assignment

• Best, Chapter 6 - Competition

Slide 3

Segment Analysis

• Market Size

• Market Share

• Price (Margins)

• Rate of Growth

Slide 4

Effects of Growth Rates on Revenue

$0

$100

$200

$300

$400

$500

$600

$700

$800

One Two Three Four Five

5%10%20%

Slide 5

Segmentation Strategies

1. Mass Market Strategy

2. Large Segment Strategy

3. Adjacent Segment Strategy

4. Multisegment Strategy

5. Small Segment Strategy

6. Niche Segment Strategy

7. Mass Customization

Slide 6

1. Mass Market Strategy

Slide 7

1. Mass Market Strategy

• Generic value proposition

• Core customer needs

• Business’ generic positioning

Slide 8

1. Mass Market Strategy

• Generic value proposition

• Core customer needs

• Business’ generic positioning– WalMart – Low Prices. Always– Sears – Where America Shops– MLB – America’s Pastime

Slide 9

Wal-Mart Rules America!• 2002 Performance

– 2002 Revenue - $245 billion– 2002 Weekly Customers – 138 million in 4,750 stores– 82% of American households purchased at least once

• Success Formula – Cost Minimization with savings passed on to consumers– Low wages – avg $13,861 in 2001– Buy cheap, sell cheap

• Leads to Category Domination– 32% of all disposable diapers– 26% of all toothpaste– 20% of all pet food

Slide 10

2. Large Segment Strategy

Slide 11

2. Large Segment Strategy

• Focus on Heavy User

• Competition?

Slide 12

2. Large Segment Strategy

• Focus on Heavy Users– Hertz in Car Rentals

• Competition?– Enterprise in Home Market

Slide 13

3. Adjacent Segment Strategy

Slide 14

3. Adjacent Segment Strategy

• Systematic Entry & Expansion

Slide 15

3. Adjacent Segment Strategy

• Systematic Entry & Expansion

Slide 16

3. Adjacent Segment Strategy

• Systematic Entry & Expansion– Honda’s entry into motorcycle market– Cannon’s entry into photocopier

Slide 17

4. MultiSegment Strategy

Slide 18

4. MultiSegment Strategy

• Focus on Less Competitive Segments

Slide 19

5. Small Segment Strategy

Slide 20

5. Small Segment Strategy

• Focus on Sophisticated User

• Focus on Environmentally Concerned

Slide 21

6. Niche Segment Strategy

Slide 22

6. Niche Segment Strategy

• Focus on Special Need Users

• Focus on Status/Luxury

Slide 23

7. Mass Customization

Slide 24

7. Mass Customization

• Internet-based Businesses

Slide 25

Segmentation Strategies

1. Mass Market Strategy

2. Large Segment Strategy

3. Adjacent Segment Strategy

4. Multisegment Strategy

5. Small Segment Strategy

6. Niche Segment Strategy

7. Mass Customization

Slide 26

Segmentation Strategies

A

B

A

D

G

Mass Market

Large Segment

AdjacentSegment

Multi-Segment

Small Segment

Niche Segment

Mass Customization

AA

Slide 27

Segment Profitability

Net Revenue Var. Cost

Marketing = Mrkt x Mrkt x per - per - Mktg

Contribution Demand Share Cust. Cust. Expenses

( ) =

Number of Customers

Margins

=

Mktg Expenses per customer

-( )x

Slide 28

1 to 1 Marketing:Selecting Your Customers

1 2 3 4 5

Customer Categories

Realized

Potential

Costs toServe

Customer

Dollars

Slide 29

Segment Profitability

Net = Net Mktg - Fixed

Income Contribution Expenses

Slide 30

Segment Strategies

Segment Characteristics Strategy

Good

Bad

Ugly

Slide 31

Industry Forces

• Market Entry/Exit

• Buyer/Supplier Power

• Substitutes/Rivalry

Slide 32

Effect on Competition?

Industry Force Example Counter Strategy

Easy to Enter Market

Hard to Exit Market

Powerful Buyers

Powerful Suppliers

Many Substitutes

Intense Rivalry (excess capacity)

Slide 33

Effect on Competition?

Industry Force Example Counter Strategy

Easy to Enter Market

Espresso stands

Hard to Exit Market

Bankrupt airlines

Slide 34

Effect on Competition?

Industry Force Example Counter Strategy

Powerful Buyers Dell, Gateway

(HP printers)

Powerful Suppliers

Intel

Microsoft

Slide 35

Effect on Competition?Industry Force Example Counter Strategy

Many Substitutes Automobiles

Intense Rivalry (excess capacity)

Dell – Compaq – HP – Gateway – Sony

Slide 36

Initial State Competitor

Self

Hold Price

Cut Price 5%

Hold Price

Share – 10%Volume – 1,000,000

Price - $100

Margin - $40

Net Contr. - $40 million

Share – 8%

Volume – 800,000

Price - $100

Margin - $40

Net Contr. - $32 million

Cut Price 5%

Share – 12%

Volume – 1,200,000

Price - $95

Margin - $35

Net Contr. - $42 million

Share – 10%

Volume – 1,000,000

Price - $95

Margin - $35

Net Contr. - $35 million

Slide 37

Competitive Advantage

Advantage Examples Methods

Cost Dell vs. Compaq

Southwest Airlines

Wal Mart, Office Depot

NBC vs. CBS

Quality HP Printers

Intel, Microsoft

Sony, Toyota

Marketing Coca Cola

McDonalds

Slide 38

Marketing Warfare

Slide 39

Basic Assumptions

• Markets are competitive• Competitors are rarely of equal strength• Competitive strategy is dictated by one’s

relative strength• Proper deployment of assets is key to

success– I.e., what you do with your assets is as

important as the strength of your assets.

Slide 40

How Markets Divide Themselves

• Leader - > 30% share

• Challenger - 15-30% share

• Flanker - 5 - 15% share

• Nichers - 1% or less

Slide 41

Leader – Defend Position

Approach Examples

Adopt an Aggressive Offense against the competition

Microsoft

Use resources to increase the cost of competition

AT&T Broadband

Slide 42

Challenger – Focus on Leader

Approach Examples

Attack Leader’s strengthbut narrowly

Pepsi

Consider turning leader’sstrength into weakness

Netscape

Slide 43

Flanker – Focus on Overlooked Areas

Approach Examples

Segment market to identify unmet needs

Chrysler

Avoid direct competition with leader and challenger

Jack in the Box

Slide 44

Nichers/Guerillas – Find areas not attractive to Others

Approach Examples

Think small Jolt

Subaru

Be prepared to quit when competition hits up

HummerMicrobrewsSnapple