Market Segmentation, Target Marketing, and Positioning

1
GRAHAM HOOLEY NIGEL F. PIERCY BRIGETTE
NICOULAUD
2
Strategic marketing planning
2

• Strategy is the matching of the activities of an
  organisation to the environment in which it
  operates and to its own resource capabilities
• Johnson and scholes (1988)

3
Introduction

• Companys capabilities are matched to the market
  environment in which it operates not for today
  but in foreseeable future
• Strategic planning attempts to answer three basic
  questions
• What is the business doing now?
• What is happening in the environment?
• What should the business be doing?

4
Figure 2.1
Strategic fit
Market needs conditions
Strategy adapted to the needs and requirements of
the market
Organizational resources suited to the markets in
which it operates
Marketing strategy
Organizational resources
Organizational resources needed for
implementation of the strategy
5
Defining the business purpose or mission

• Requires asking fundamental questions
• What business are we in?
• What businesses do we want to be in?
• Who is our major competitor?
• What markets are we in?

6
Mission formulation and statement

• The strategic intent or vision of where
  organization want to be in foreseeable future
• The values of the organization should be spelled
  out to guide operations
• Articulate distinctive competencies
• Market definition, in terms of customer targets
• Finally, it should spell out where organization
  intends to be positioned in marketplace

7
Figure 2.2
Components of mission
Strategic intent Vision of what you want to be
Market definition Customer targets
Company values Guiding principles
Mission Objectives and strategy
Competitive positioning Differential advantage
Distinctive competencies Core skills
8
The marketing strategy process

• Three main levels
• Establishment of a core strategy
• Assessment of companies capabilities (strengths
  and weaknesses relative to competition
  opportunities and threats posed by the
  environment)
• The creation of the companys competitive
  positioning
• competitive edge in serving customers better
  than competition is defines
• The implementation of the strategy
• Department putting strategy into action is created

9
Figure 2.3
The marketing strategy process
Business purpose
Core strategy
Environment analysis
Company analysis
Competitive positioning
Market target
Competitive advantage
Implementation
Control
Organization
Marketing mix
10
Establishing the core strategy
11
Analysis of organizational resources

• Creation of long list of resources and many
  weaknesses that an organization has at its
  disposal
• They may stem from
• Skills of the workforce in assembling products
• Skills of management in planning
• RD department in new product ideas
• Distinctive competencies may lie in image, market
  presence or its after sales services (exploitable)

12
Drukers seven types of businesses

• Product portfolio

13
Drukers seven types of businesses

• Todays breadwinners
• products earning healthy profits now
• Tomorrows breadwinners
• Expected to take breadwinning role in the future
• Yesterdays breadwinners
• Supported the company in the past
• Developments
• Recently developed that may have some future

14
Drukers seven types of businesses

• Sleepers
• Have been around for sometime but failed to
  establish themselves in their markets
• Investments in managerial ego
• Have strong product champions among influential
  managers
• Failures
• Failed to play a significant role in the
  companys portfolio

15
Figure 2.4
Product types in the portfolio
Tomorrow's breadwinners
Developments Sleepers Ego trips
High
Market attractiveness
Life Cycle
Death Cycle
Low
Failures Yesterdays breadwinners
Todays breadwinners
Low
High
Business strength
16
Portfolio planning

• Diversified organizations need to find methods
  for assessing the balance of business in its
  portfolio
• Development of business strategies and allocation
  of resources (both managerial and financial)
• Analyzing portfolio balance

17
Figure 2.5
Balancing the business portfolio
Long-run corporate health requires a balance of
Products that generates cash now
Other that use cash now but promise to generate
cash in the future
18
Figure 2.6
Unbalanced, present-focused business portfolio
A great present but what about the future?
Other that use cash now but promise to generate
cash in the future
Products that generates cash now
19
Figure 2.7
Unbalanced, future-focused business portfolio
Future prospects good but who pays todays bills?
Products that generates cash now
Other that use cash now but promise to generate
cash in the future
20
Analysis of the markets served

• Opportunities and threats facing the company
• Stem from two main areas
• The customers (both current and potential) and
  competitors ( again both current and potential)
• Most markets consist of heterogeneous customers
  (varying needs and demands)

21
Figure 2.8
SWOT Analysis
Internal
External
Strengths What are we god at relative to
competitors?
Opportunities What changes are creating new
options for us?
Good points
Threats What emerging dangers must we avoid or
counter?
Weaknesses What are we bad at relative to
competitors?
Danger points
22
Figure 2.9
SWOT strategic implications
Opportunities
Threats
Exploit existing strengths in areas of opportunity
Use existing strengths to counter threats
Strengths
Build new strengths to counter threats
Build new strengths first to take advantage of
opportunities
weaknesses
23
Core strategy

• Define the key factors of success
• Company sets its marketing objectives
• Objectives should be both long and short term
• Core strategy varies at different stages of
  product life cycle
• Expand the market (achieved in early growth
  stages of lifecycle) or to increase share of
  existing market (pursued during late
  growth/maturity stages

24
Expand the market

• Market expansion can be achieved through
  attraction of new users to the product or service
• Through geographic expansion of the companys
  operations (both domestically and internationally)

25
Figure 2.10
Strategic focus
Improve performance
Increase sales
Improve productivity
Expand market
Increase share.
Expand market
Increase share.
New uses New users Increasing use
frequently New products
Increase price Add value Change product mix
Capital costs Fixed costs Variable costs
Win share Acquire share Create alliances
26
Increase share

• Main routes to increasing share include
• Winning competitors, customers
• Merging with (or acquiring) the competitors
• Entering into strategic alliances with
  competitors, suppliers and/or distributors
• Increasing usage rate may be viable approach to
  expanding the market for some products

27
Improving profitability

• Through improving margins
• Increasing price, reducing cost or both
• Removing poorly performing products and
  concentrating on more financially viable

28
Creating the competitive positioning

• Statement of companys market targets
• Where the company will compete and differential
  advantage
• How the company will compete
• Market targets
• Select those targets most suited to utilizing
  companys strengths and minimizing vulnerability
  due to weaknesses

29
Market targets

• Market will generally be more attractive if the
  following hold
• It is large
• It is growing
• Contribution margins are high
• Competitive intensity and rivalry are low
• There are high entry and low exit barriers
• The market is not vulnerable to uncontrollable
  events

30
Differential advantage
31
Cost leadership

• Company seek to obtain a cost structure
  significantly below than that of competitor
• Through construction of efficient scale
  economies, cost minimization in RD, service,
  sales force, advertising etc

32
Figure 2.11
Routes to competitive advantage
High
Competitive advantage
Competitive disadvantage
Valued uniqueness
Stuck in the middle
Low
Low
High
Relative delivered cost
33
Differentiation

• Something that is seen as a unique in the market
• Companys strengths and skills are used to
  differentiate the companys offerings than
  competitors
• Differentiation can be achieved through design,
  style, product or service features, price, image
  etc

34
Differentiation and cost leadership

• Both could be pursued simultaneously (Fulmer and
  Goodwin, 1988)
• Cost leadership may be impossible to sustain due
  to competitor imitation
• Cost leadership requires minimal spending on RD,
  product improvement and image creation

35
Implementation

• Task of marketing management is to implement
  those decisions through marketing effort
• Three basic elements of implementation
• Marketing mix, organization and control

36
Marketing mix

• Each of the element of the mix should be designed
  to add up to the positioning required
• Where elements of the mix do not pull in the same
  direction but contradict each other, the
  positioning achieved will be confused and
  confusing to customers

37
Organization

• How the marketing effort and the marketing
  department are organized will have effect on how
  well the strategy can be can be carried through
• Required manpower and financial resources to be
  made available

38
Control

• Monitor and control the effort
• Performance can be monitored in two ways
• Market performance (sales, market share, customer
  attitude and loyalty and changes in them over
  time)
• Financial performance ( monitoring of product
  contribution relative to the resources employed
  to achieve it)

39
Amber reports the most important marketing
metrics used by companies
40
Marketing metrics

• Relative perceived quality
• Loyalty/retention
• Total no of customers
• Customer satisfaction
• Relative price (market share/volume)
• Perceived quality/esteem
• Complaints (level of dissatisfaction)
• Awareness and distribution/availability