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