Marketsensingandlearningstrategy

Strategicmarketchoicesandtargets

Customervaluestrategyand positioning

Strategicrelationshipsandnetworks

Strategic thinking andthinking strategically

Strategictransformationand strategyimplementation

Market definition and the competitive box Market segmentation and targeting Market positioning Market choices

Markets are not fixed or static The way they are defined should not be

either The danger is being trapped inside the

competitive box while the important changes occur outside the box

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 baseand competing for market sharethrough incremental innovationNew types of

competitorNew business

models

Newcustomers New

customers

Re-thinking market boundaries is a high priority

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

The product-customer matrix a practical tool for looking at markets in new

ways

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

Market:

1.

2.

3.

4.

5.

6.

7.

Total

Mapping market structure and change insights into drivers of change fundamental to looking at market

segmentation and targeting

ProductionOf Central

HeatingUnits

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

Market segmentation dividing market into groups of buyers who

make coherent targets, e.g., by demographics for consumers to industry type for companies

aims to develop consistent marketing programmes for segments with potentially different approaches for each

Market segments

Marketingactions

A B C D

Product

Price

Communications

Distribution& service

Differentiatedmarketingactions acrossmarketsegments

Consistent value offerings foreach market segment

Insightful segmentation is based on the customer benefit from the product or service e.g., customer loyalty-based segmentation e.g., customer relationship-based

segmentation

Loyalty segments Our customersCompetitors’ 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 becomeinterested 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

Relationshipsegments Our customers Competitors’ customers

Relationshipseekers

Loyal buyers

Relationshipexploiters

Arm’s lengthtransactionalcustomers

Invest in customer relationshipmanagement and loyalty

programmes to give a closerelationship that is long term

Find ways to offer a relationship that is superior inthe customer’s 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 on loyalty incentives and provide

economic contact, e.g. throughInternet

Offer relationship-basedincentives to switch suppliers,but control costs to allow for

short retention

Emphasize value offering andavoid relationship investments

unless can be converted toLoyal Buyers

Demonstrate superior valueoffering and lack of ties or

barriers to switching

Broad segments and micro-segments Strategic market segmentation

distinction between strategic and managerial issues in segmentation

Strategicsegmentation

Managerialsegmentation

Corporate mission

Values

Strategic intent

Market position

Marketing plans

Resource allocation

Operational management (sales, advertising)

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

Explicitness and focus

Organizationaldecision makinglevel

Explicit/external Implicit/internal

Strategic

Operational

Strategic segmentation

Managerial segmentation

• Customer benefits• Qualitative approach• Links to mission and vision

• Organizational structure• Information processing• Corporate culture and history

• Conventional segmentation bases• Quantitative approach• Conventional tests and criteria of choice

• Sales and distribution organization• Advertising and promotion• Media buying• Pricing tactics

Market segment attractiveness and internal compatibility consider not just how attractive a segment is

as a target, but also how well it fits with company capabilities

a significant implementation question

Internal compatibility

Market segmentattractiveness

High Low

High

Low

Attractive segmentsthat match with

companycapabilities

Attractive segmentsbut with poor match

with companycapabilities

Unattractive segmentsthat do not match withcompany capabilities

Unattractive segmentsbut with match to

companycapabilities

How customers compare you to the competition and what they decide

The logic of blue oceans and red oceans finding spaces where there is no competition

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

But, will the big idea work? buyer utility strategic pricing business model adoption hurdles

Usually there are choices – which markets/segments to target? how do we set priorities?

Portfolio approaches compare market/segment attractiveness (how well the

opportunity fits our goals and capabilities market position (how well we believe we can

do in this market/segment)

Market attractiveness

Marketposition

High Low

Strong

Weak

Corebusiness

Peripheralbusiness

Illusionbusiness

Dead-endbusiness

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 will take 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