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Strategic Positioning and Segmentation

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Title: Strategic Positioning and Segmentation


1
Strategic Positioning and Segmentation
  • Gary Akehurst

2
Strategic Positioning and Segmentation
  • Marketing and sales strategy development is of
    necessity iterative, giving strategic thrust
  • 1 the bases upon which the organisation intends
    to establish its competitive advantage
  • 2 the scope, or boundaries of the area in which
    it is intended to compete (its competitive arena)
  • 3 the corporate positioning it intends to achieve
  • 4 the market segments it will serve
  • 5 the positioning it aims for in each competitive
    arena it enters

3
Strategic Positioning and Segmentation
Strategic Thrust
competitive advantage cost differentiation
corporate positioning
product-market scope segmentation
Product/market positioning
4
Strategic Positioning and Segmentation
  • a company can seek to establish its distinction
    in a market by emphasising lower cost or seeking
    other bases upon which to differentiate itself
  • this decision influences the nature of the
    offering to the market and is fundamental in
    determining its relative attractiveness
  • this decision on how to develop its competitive
    advantage deliberately constrains the company in
    its strategic options
  • this decision concentrates resources, efforts and
    strategic thinking in particular ways

5
Strategic Positioning and Segmentation
  • building and sustaining competitive advantage
    means that some competencies will be developed
    and some assets will be enhanced at the expense
    of others
  • strategic thinking will be channelled to develop
    strategies in a given direction in the search for
    advantage
  • channelling of strategic thinking gives a strong
    link with other decisions
  • choice of competitive advantage shapes potential
    positioning strategies (determining that some
    positions may be possible and others are not)

6
Strategic Positioning and Segmentation
  • cost-based sources of competitive advantage may
    relate to production or marketing efficiency,
    improved manufacturing systems, capacity
    utilisation, strengthening buying power or
    reducing materials and overhead costs
  • differentiation-based sources of CA may relate to
    product attributes or performance, the quality of
    materials and processing, product availability or
    to special skills, experience and knowledge

7
Strategic Positioning and Segmentation
  • Competitive arena
  • choice of where to compete can be as important as
    how to compete
  • defining the competitive arena could be in terms
    of products and markets - this has been called
    product-market scope (Wensley calls this
    product-market space)
  • a product-market is a group of potential
    customers with similar needs and sellers who
    employ similar methods of technologies and
    marketing programmes to satisfy those needs
  • a product-market space is the commercial arena in
    which sellers compete with each other for
    customers
  • Ansoff considers alternative growth paths as
    either existing products and markets or new
    products and markets

8
Strategic Positioning and Segmentation
  • Competitive positioning
  • concerned with how customers perceive
    alternative offerings on the market compared to
    each other
  • Corporate positioning
  • concerned with how the organisation is, and
    wishes to be regarded by, consumers relative to
    the competition to be effective this positioning
    is built upon and should be consistent with the
    choices made about the basis of competitive
    advantage

9
Strategic Positioning and Segmentation
  • positioning may start with a product, a service,
    a company, a person
  • but it is not what you do to a product
  • it is what you do to the mind of the prospect
  • you position the product in the mind of the
    prospect
  • source Ries, A. and J. Trout, 1982, Positioning
    The Battle for Your Mind, New York McGraw-Hill

10
Strategic Positioning and Segmentation
  • Bases of Corporate Positioning
  • the organisation could strive for leadership in
    terms of
  • market share
  • quality
  • service
  • technology
  • innovation
  • variety
  • integrity
  • community service

11
Strategic Positioning and Segmentation
  • Bases of Product Positioning
  • the products position could be based upon
  • cost, economy, value
  • product features
  • product range
  • product quality
  • services, customer care, problems solved
  • use and application type

12
Strategic Positioning and Segmentation
  • Segmentation
  • differences between customers in terms of their
    characteristics, behaviour and needs
  • while positioning and segmentation are different
    concepts, ultimately they are linked by customer
    needs (focusing on the customer benefits that
    matter most to different customer types while
    the strongest competitive position to take is
    that where customers recognise that a supplier or
    product is the one to choose because it best
    meets their needs)
  • target markets will be identified from the
    choices made about product-market scope and from
    the analysis of potential market segments
  • in these target markets product-market positions
    are established

13
Strategic Positioning and Segmentation
Competitive positioning and market segmentation
How customers perceive the alternatives
How planners identify groups of customers
Competitive market positioning segmentation
Customer needs
Market
Market offerings
14
Strategic Positioning and Segmentation
Strategic marketing and sales plans require
decisions on what, who, how, where and
when WHAT WHO positioning segmentat
ion HOW, WHERE AND WHEN need to specify
target markets, communication and the marketing
mix (4Ps)
15
Strategic Positioning and Segmentation
  • segmentation and positioning strategies are thus
    at the heart of marketing and sales strategy
    development
  • they provide much of the strategic thrust in
    directing
  • what is to be achieved (a given market
    positioning concerning customer perceptions and
    preferences)
  • amongst what target customer groups
  • both start as issues of perception
  • the centrality of both these strategies is
    demonstrated by the strong links they have to
    other major elements in marketing and sales
    strategy formulation

16
Strategic Positioning and Segmentation
Stages in segmentation and positioning
Market segmentation
Identifying the most productive bases for
dividing a market, identifying customers in
different segments and developing segment
descriptions evaluating attractiveness of
different market segments, niches or segment
groups, choosing which should be targets identi
fying the positioning of competitors in the
market, target segments or niches, to develop a
positioning strategy doing this should inform
segmentation, revising targets and positioning
approaches
Choice of target markets
Competitive positioning
Source Hooley, Saunders Piercy, 1998, p202
17
Strategic Positioning and Segmentation
  • positioning involves designing the companys
    offering and image so that they occupy a
    meaningful and distinct competitive position in
    the target customers minds (Kotler)
  • it is an attempt to influence that image or
    perception so it is cumulative, relative and
    imaginary
  • it may be ill-defined but how can this be planned
    and controlled?
  • levels of precision depends upon choices made
    about the variables or dimensions
  • Unique or fuzzy, confused, mutually inclusive?
  • How easily measured?
  • Direct or surrogate measures?
  • Operational?
  • Can plans be made to reach target customers?

18
Strategic Positioning and Segmentation
  • in considering positioning there needs to be an
    assessment of the factors which distinguish the
    advantages and disadvantages of competitive
    market offerings
  • there is a strong connection to brand strategy
  • without branding there would need to be a very
    high volume of marketing communications to get
    consumers to distinguish between products
  • positioning and segmentation are linked, either
    of the following may apply
  • given target market segment, which product
    positioning?
  • given target product positioning, which market
    segment?

19
Strategic Positioning and Segmentation
  • Not all competitive differences will create a
    strong competitive position and attempts to
    create differentiation should meet the criteria
    of
  • importance (creates a highly valued benefit for
    significant numbers of customers)
  • distinctive and pre-emptive (difference cannot be
    imitated or performed better by others)
  • superior (a superior way to obtain the benefit)
  • communicable (the difference should be capable of
    being communicated to customers and understood by
    them)
  • affordable (target customers can afford to pay
    for the difference)
  • profitable (the difference will command a price
    adequate to make it profitable)

20
Strategic Positioning and Segmentation
  • Positioning Strategy - the marketing mix must be
    synchronised to deliver the desired positioning
  • products need to be convincing (high quality
    positioning with inferior products? Consider both
    the physical and perceptual properties of
    products the situation conditions consumer
    perceptions - e.g. tomato sauce in a restaurant
    serving haute cuisine?)
  • services need to re-inforce the position same
    day service must be that claims of fast
    delivery, no waiting or friendly/competent/timely
    service engineers must be realistic
  • pricing should be appropriate to the position

21
Strategic Positioning and Segmentation
  • distribution - product availability - wide
    availability for a mass market product and
    selective availability for distinctive status
    quality location, quality of staff, training and
    clientele must be consistent with the position
  • communication - expression adds depth to images -
    product positions identifying types of people or
    lifestyles would be difficult without
    communication (advertising)
  • products with unique applications need
    demonstration
  • products with superior features need them to be
    known

22
Strategic Positioning and Segmentation
  • Successful Positioning Strategy
  • positioning must be on dimensions which are
    relevant and important to the consumer (would a
    restaurant which advertised free doggie bags
    attract you? How important is the colour of roof
    insulating material?)
  • the promoted image must be believable (if
    reference influence is employed in advertising
    then it must be relevant and credible)
  • the strategy must be consistent and nurtured over
    time (promises must be delivered and buttressed
    by subsequent word of mouth trade customers may
    react badly to inconsistent suppliers)
  • positioning must be reinforced by all aspects of
    the marketing mix
  • the whole exercise should be worthwhile

23
Strategic Positioning and Segmentation
  • Positioning Errors
  • under-positioning (customers have only vague
    ideas about a company or its products, do not
    perceive anything special about it)
  • over-positioning (customers have too narrow an
    understanding of the company, product or brand)
  • confused positioning (frequent changes and
    contradictory messages confusing customers)
  • doubtful positioning (claims made for the
    company, product or brand may not be accepted
    whether true or not)

24
Strategic Positioning and Segmentation
  • Positioning Problems
  • corporate and product positioning
  • consistent product and corporate positioning?
  • corporate umbrella with variable product
    positions?
  • mixed - some under umbrella with some outliers
  • sometimes good reasons for diversity (e.g
    high/low quality)
  • history and inertia may explain some of the
    differences (e.g. acquisitions with unique
    history and high profile brands - it may be
    imprudent to impose corporate uniformity because
    this could diffuse the intensity of the brand
    positioning)

25
Strategic Positioning and Segmentation
  • Positioning Problems continued
  • positioning intensity and the need to retain some
    flexibility (intense brand positions can impose
    constraints upon future strategies)
  • temptation to over-exploit an intensely
    positioned brand with line extensions and new
    products which do not fit the original
    positioning, and which could damage the original
    product
  • multi-national positioning - some brands can
    achieve similar positions in many countries
    simultaneously but in many situations it would
    not be possible or appropriate

26
Strategic Positioning and Segmentation
Alternative Perspectives of the Total Market
Describe and Divide
perfectly homogeneous completely
heterogeneous Market market segments markets
D1 D2 D3 D4 D5 D6
D1 D2
D1
D2
Aggregates to
D3
Disaggregates to
D3
D4
D4
D5
D6
D5 D6
Economists marketing viewpoint of
buyer perspective managers view behaviour
27
Strategic Positioning and Segmentation
  • Segmentation
  • 1 significant in market and sales analysis
  • - better understanding of customer needs
  • - closer definition of competitors and
    identification of market opportunities
  • 2 significant in strategy development
  • - major aspect of strategic focus
  • - related to strategic fit and company match to
    environment
  • 3 significant in marketing operations
  • - better target definition
  • - more efficient promotion
  • - products match market requirement
  • - better aligned marketing channels and tighter
    control

28
Strategic Positioning and Segmentation
  • Segment basis must be
  • measurable
  • accessible
  • stable
  • reasonable size

29
Strategic Positioning and Segmentation
  • Consumer market variables
  • geographic
  • demographic
  • age, sex, family size, income, occupation,
    education, social class, geodemographic
  • psychographic
  • lifestyle, personality, attitudes, interests,
    opinions
  • behavioural
  • locations, benefits, usage, loyalty

30
Strategic Positioning and Segmentation
  • Segmenting industrial markets
  • background company characteristics
  • industry type, company size, customer location,
    company technology, customer capabilities,
    purchasing organisation, power structures,
    purchasing policies, product application
  • attitudinal characteristics
  • behavioural characteristics
  • buyers personal characteristics (motivation,
    risk perceptions, buyer-seller similarity or
    compatibility in technology, corporate culture,
    company size etc)
  • product/brand status and volume

31
Strategic Positioning and Segmentation
  • For positioning studies (product usage, product
    performance, benefits sought, a hybrid of these
    variables)
  • For new product concepts and new product
    introductions (reaction to new concepts -
    intention to buy, preference over current brand,
    benefits sought)
  • For pricing decisions (price sensitivity, deal
    proneness, price sensitivity by purchase/usage
    patterns)
  • For advertising decisions (benefits sought, media
    usage, psychographic/lifestyle, a hybrid of these
    variables)

32
Strategic Positioning and Segmentation
  • Increasing importance of segmentation?
  • Maturing product-markets (growth by winning
    market share by adapting to segment needs, e.g.
    baby napkins)
  • Wealthier sophisticated consumers (new needs,
    tastes, lifestyles)
  • New manufacturing technology (CAD/CAM allows
    greater customisation)
  • New targeting technology (GIS, including
    geodemographics, hardware, software and
    databases)
  • New media (broadcast and narrow-cast,
    terrestrial and cable TV, digital TV, radio - new
    commercial channels, digital)

33
Strategic Positioning and Segmentation
  • The changing consumer - four core trends
  • autonomy of the individual (more emphasis on
    self-employment, creative leisure, equal
    opportunities)
  • tolerance, empathy, feeling (greater need to
    understand feelings, greater home-centredness,
    identification with small communities)
  • diffusion of authority (complex society,
    expansion of role sharing, blurring of existing
    structures)
  • decline of materialism
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