Segmenting Targeting and Positioning Dr Dawne Martin MKTG

Segmenting, Targeting and Positioning Dr. Dawne Martin MKTG 550 – Business Marketing October 4, 2012 Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 1

Schedule and Learning Objectives Tuesday, October 9 – Work in your groups on Project – Due Friday, Oct. 12 Thursday, October 11 – Read Chapter 10 › Case Due: Learning Objectives › Review concepts of segmenting, targeting & positioning › Apply target market selection based on value and the value chain › Identify information needed for segmentation › Apply segmentation evaluation & targeting practices to market opportunities › Review the idea of B 2 B value propositions from Narus, Anderson and Von Rossum article Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 2

Market Segmentation Market segments--clusters of firms that are distinct from others in terms of what they need and how they buy Targeting (Selecting target markets)— › Producing an offering that meets the needs of customers in the segment better than the competitor’s › Reaching segment through communication and distribution channels so that customers realize the superior value offered Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 3

Choosing Segments Marketers choose segments to target by: › › Measurability Accessibility Substantiality Actionability Effective segement › members that are homogeneous within the segment › members as heterogeneous as possible with the members of other segments Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 4

Positioning Relationship of product and marketing activities In comparison to other segments, participants must demonstrate superior value to consumers Positioning is in the mind of consumer Resources are often managed to ensure successful positioning Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 5

Business to Business Segmentation Product Offered Industry of Customer Technology Used Buying Behavior Common Basis Size of Company Geographic Region Size of Account Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 6

Strategies for Market Segments Competitive advantage through low cost position Competitive advantage through differentiated offering Competitive advantage through providing an exact product to a niche market Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 7

Segments and The Value Chain – 2 a Value Chain Offering Value Enabling Value Creating – Infrastructure – Input Logistics – People Management – Operations – Technology – Delivery Development Logistics & Mgt – Marketing – Resource – Service Acquisition Key elements of value chain contributing to offering – complicated chain of activities due to complicated offering a a b b cc d d Segment 1 2 3 4 Key elements of offering addressing subgroups in the segment – complex offering Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Subgroups with differing needs Several subgroups in the market segment due to differing needs 8

Segments and The Value Chain – 2 b Value Chain Value Enabling Value Creating – Infrastructure – Input Logistics – People Management – Operations – Technology – Delivery Development Logistics & Mgt – Marketing – Resource – Service Acquisition Key elements of value chain contributing to offering – simpler chain of activities due to simpler offering Offering a a b b Segment 1 2 Fewer key elements of offering addressing subgroups in the segment Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Fewer subgroups in the market segment due to more homogeneous needs 9

Analytical Approach to Segmentation Produces two sets of data: › Determine relative size and growth potential of segments › Determine individual segment needs and buying behavior North American Industrial classification Code (NAICS) - designed and used by the U. S. government, Canada and Mexico › Visit: http: //www. census. gov/naics/ for full description. Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 10

North American Industry Classification System (NAICS) 11 Agriculture, Forestry, Fishing 53 Real Estate and Rental and Leasing and Hunting 21 Mining, Quarrying, and Oil 54 Professional, Scientific, and Gas Extraction Technical Services 22 Utilities 55 Management of Companies and Enterprises 23 Construction 56 Administrative and Support and Waste Management and Remediation Services 31 - Manufacturing 61 Educational Services 33 42 Wholesale Trade 62 Health Care and Social Assistance 44 - Retail Trade 71 Arts, Entertainment, and 45 Recreation 48 - Transportation and 72 Accommodation and Food Services 49 Warehousing 51 Information 81 Other Services (except Public Administration) 52 Finance and Insurance 92 Public Administration Source: www. census. gov/eos/www/naics/index. html Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 11

Innovation Translation Look for new customers Verify existence of segment o Do so by transferring technology offering of the first customer to other customers Involves exploratory interaction with current and prospective customers Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 12

Factors in Assessing Segment Attractiveness Size of segment Growth rate of segment Intensity of unmet need(s) Reach ability of segment through communications channels Readiness of segment to seek and adopt a solution Likelihood of competitive intensity Sufficiency of channel reach Likely value contribution by channel(s) Match between segment needs and supplier’s strengths Differentiability of supplier’s offering Opportunity to achieve strategic goal by addressing segment Opportunity to achieve learning goal by addressing segment Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 13

Logical Analysis of Market Segments Setting Goals o Achieving sales level, growing at a desirable rate, and other tangible goals Defining Segments o Measures that reflect differences in need Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 14

Segment Attractiveness for Hypothetical Example Attributes Segment 1: Major Turnaround Segment 2: Stopping Deterioration Segment 3: Competitive Improvement Segment 4: Specific Area Improvement Potential size year 2010 (in $million) 2 $195. 0 3 $390. 0 4 $585. 0 4 $975. 0 Growth, percent increase by 2012 4 100% 1 50% 5 150% 5 4 3. 5 (High variance) 3 3 4 3 (High variance) Channel reach 5 5 Communications reach 4 4 Capability fit 2 5 5 2 Price sensitivity 2 3 4 3 27 31 30. 5 29. 5 Scores on 5 -point scale* Need strength Competitive strength Overall attractiveness (sum of attribute scores) Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 15

Technology Adoption Life Cycle (TALC) Pragmatists Sales from New Adopters/period Conservatives Visionaries Laggards Technophiles Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall Time Also shown as Exhibit 2 -6 16

Technology Adoption Life Cycle: Adopter Categories Technophiles—try out the latest and greatest technology; do not need fully developed offering Visionaries—see competitive advantage by using technology; standardized buying with custom offering Pragmatists—want same as visionaries but will not buy unless technology is easily adopted with minimal difficulty Conservatives—only buy when it doesn’t cost to adopt; need to be convinced that the offering is exact for needs Laggards—will avoid adoption of technology at all costs Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 17

Technology Adoption Life Cycle: Adopter Category Position and Targeting Technophiles—needs are curiosity; target early Visionaries—gain competitive edge and will pay for it; target for support Pragmatists—keep up with cutting edge; use innovation translation Conservatives—need new technology to keep up to standards Laggards—unique needs met by old technology Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 18

Product Line Positioning Goal is to get members of the different segments to see and value both the differences and similarities Relate to the overall corporate brand positioning A flagship product may be desired Position consistent with Mc. Kenna’s idea of market ownership Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 19

Customer Value Propositions Statement of the benefits the customer will derive from a product/service How value propositions are used: › Positioning relative to competitors › Advertising › Method of focusing on what offerings are really worth to customers Anderson, Narus, van Rossum, “Customer Value Propositions in Business Marketing, HBR, March 2006

Building Value Propositions Types of Value Propositions › All benefits : all benefits received › Favorable Points of Difference: all favorable points of difference value to competitor › Resonating Focus: One or two points of difference whose improvement will deliver greatest value to customer Building Blocks of Value Propositions › Points of Parity › Points of Difference › Points of Contention

Identifying and Demonstrating Customer Value Customer value analysis and “Value word equations” using industry terminology › Power reductions cost savings = k. W spent X no. of operating hours/yr X no. of years of operation – Rockwell Automation Demostrate Customer Value ---Value Case Histories – IBM Success Stories Document Customer Value - GE

B 2 B E-Commerce in China: Alibaba. com What are the external influences affecting Alibaba and B 2 B ecommerce in China? What is the focus of Alibaba’s business what makes it so different from some US ecommerce companies? Would Alibaba have been as successful today without the leadership of someone like Jack Ma? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 23

E-Commerce in China What are the benefits of the strategic cooperation with China Post? What are the current and future benefits of the cooperation with Yahoo? Is there room for Alibaba in the global race for online supremacy and what would you do to secure the future for the company? Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 24