BUS3140

1. BUS3140 Lecture 3

2. Agenda • Customers 2 (of 2) • Segmentation and target market • Importance of differentiation • Market focus (one market in the early phases of company’s life • Challenges • Cost drivers • Market strategies • Ramp-up times

3. Customer segmentation and target market • Customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests, spending habits and so on. • Traditional segmentation focuses on identifying customer groups based on demographics and attributes such as attitude and psychological profiles. • Value-based segmentation, on the other hand, looks at groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them. • Work in groups of 2-3 and come up with some novel ideas about how to segment customers (both traditional and value-based and … other?) Share with Class

4. Customer segmentation and target market • Target marketing allows you to focus your marketing dollars and brand message on a specific market that is more likely to buy from you than other markets. This is a much more affordable, efficient, and effective way to reach potential clients and generate business. • Why? • Small businesses cannot *afford* to compete in many/all markets • Small businesses can co-exist with large businesses by focusing on niche markets (think customized service/product) • Identify most and least profitable customers (and respond/focus accordingly)

5. differentiation • Product differentiation is a marketing strategy that businesses use to distinguish a product from similar offerings on the market. • For small businesses, a product differentiation strategy may provide a competitive advantage in a market dominated by larger companies. • Why? • By focusing on the cost value of the product versus other similar products on the market, it creates a perceived value among consumers and potential customers. • product differentiation strategy also allows business to compete in areas other than price (Small businesses can focus the differentiation strategy on the quality and design of their products and gain a competitive advantage in the market without decreasing their price.) • creates brand loyalty among customers • By focusing on the quality and design of the product may create the perception that there's no substitute available on the market.

6. differentiation • How? • Select your Niche (prove you are a master in one area) • Product features and design (make it irresistible to your customers - innovate) • Branding (make sure they know its yours!) • Location and convenience (make it easy for your customers to use you) • Service Quality and customer support (build relationships and take care of your customers) • Interact with People (both customers and not-yet customers – Tell them about your differences and listen to their feedback – respond accordingly) • Any other strategies that you might use to differentiate yourself?

7. Market focus • all of the companies planning processes and tools to continuously focus and re-focus critical cash flow and human resources on a changing portfolio of market opportunities that create long term cash flow. • The overriding objective of a market-focused company is to make sure that every product in the portfolio at every level of the company is a current or potential winner. • Product Characteristics: • Product winners must create and sustain customer choice, loyalty and market share. • Product winners must produce long-term positive cash flow over some reasonable time horizon. • Product winners must create strategic synergies for other products in the portfolio, those shared characteristics between products that help other products create more long-term cash flow. http://iveybusinessjournal.com/topics/strategy/how-to-create-market-focused-product-winners#.U44lFZRdWts

8. Challenges (1) • Cost Drivers • A factor that can causes a change in the cost of an activity. • An activity can have more than one cost driver attached to it. For example, a production activity may have the following associated cost-drivers: a machine, machine operator(s), floor space occupied, power consumed, and the quantity of waste and/or rejected output. • Let’s walk through the whole process of cost drivers and use “minimum wage” as our cost driver

9. Challenges (2) • Market strategies • (def’n) A process that can allow an organization to concentrate its resources on the optimal opportunities with the goals of increasing sales and achieving a sustainable competitive advantage. • Eg: • No time/resources to support new stuff because we are supporting existing stuff • Not sure what to put into the next version • Delay release of next version in order to implement more features • Any other examples? How would you deal with each of these?

10. Challenges (3) • Ramp-up times • an increase in firm production ahead of anticipated increases in product demand. • Alternatively, ramp up describes the period between product development, and maximum capacity utilization, characterized by product and process experimentation and improvements. • Ramp up typically occurs when a company strikes a deal with a distributor, retailer, or producer, which will substantially increase product demand. • How can ramp-up times affect our business?