Market-Based Management

1. Market-Based Management Chapter 5 Market Segmentation, Targeting and Positioning

2. Market segmentation overview • Why do we need to segment markets in the first place? • Because mkts are seldom homogeneous • Thus people have much different tastes, etc.

3. Criteria for Effective Segmentation Segments must be: • Measurable - in terms of purchasing power and size. • Reachable - can promote to and serve seg. effectively. • Profitable - large enough with sufficient disposable income to be profitable to serve. • Match Capabilities - segment must fit with firm cap’s in process tech., dist., mktg., etc.

4. Segmenting by Characteristics of People: • Geographic Segmentation • Psychographic • Social class, Lifestyle, Personality. • Demographic • Age, Sex, Occupation, Education

5. Segmenting Organizational Mkts by Firm Characteristics:

6. Needs & Preferences Segmentation: • Usually the best way • Benefits sought/problems solved. • e.g. Price, Image, Value • Attitudes toward product • Perceptions of product/svc.

7. Segmenting by Other Behaviorial Aspects: • Product usage • Brand loyalty • Customer Satisfaction

8. Needs Based Segmentation: • For each segment considered, we develop a profile based on the needs and benefits sought • Done by surveys usually • But these are not readily observable in many cases. • So we need a way to identify these target consumers.

9. Thus, by linking to demos, we hit can develop a profile of the seg.

10. There Are Two Basic Approaches to Marketing Products • Undifferentiated • Differentiated

11. Undifferentiated Marketing • Works in Mkts Where Overriding Concern/Need Is Common Among All Consumers. • Can Be Efficient • One Product for All • Most Marketers Find This Does Not Work Very Well

12. Differentiated Marketing • Develop Unique Products for Each Market Segment • Position Them to the Customers in That Segment • Develop the Marketing Mix to match the position.

13. Differentiating a Product Offering. • Product • Features, Performance, Durability, Reliability, Style, Benefits Received • Service • Delivery, Installation, Customer Training, Consulting Services, Maintenance and Repair • Personnel • Competence (Skill/Knowledge), Courteous, Credible, Trustworthy, Reliable ,Consistent, Responsive • Image • Product Must Relate to a Strong Image Producing Thing or Idea (Ideas, Symbols, People, Events)

14. Next Step is to Identify Positioning Concepts for Each Target Segment • What Is Positioning?

15. Positioning Is the Relationship of Products to Positions in the Consumers Mind. • We Want Our Users/Consumers to Understand What Our Product Is and What It Stands For. • Product Ladder Exercise for Colas

16. Criteria for Position Selection • Differences Must Be • Important to Buyers • Distinctive • Superior to Other Products Which Satisfy This Need • Communicable • Not Easily Copied • Affordable • Profitable for firm

17. Other Factors • The Product Itself Must Be Right • Price must be right. • The Image It Coveys Must Fit the Position • Media Support Must Carry the Same Message

18. Positioning Approaches • Position Against the competition. • Avis "Were Number Two, We Try Harder“ • Use Competition's Features Against Them • 7-Up "the Uncola“ • New, Unoccupied Position • Apple “Works Better, Hip, Cool“ • Reposition the Competition • Advil Repositioning Tylenol

19. Chapter 6Competitor Analysis and Sources of Advantage

20. Competitive Analysis • The search to understand competitor’s advantages and disadvantages

21. Five Forces Comparison

22. Sources of Competitive Advantage

23. Cost Advantage • Variable and Fixed Costs • Scale effects • Scope effects • Learning effects • Strong cost advantage is a barrier to entry

24. Cost and Volume Cost ($) Avg. costs decrease asfirm increases volume LRAC A Firm A movesfrom A to A’due to learning andreinvestmentWhat shouldFirm B do? LRAC B LRAC A ‘ Volume

25. Profit Impact of Differentiation (which we’ve already covered) Advantages.

26. Differentiation • Increases avg. costs • Also increases profitability due to: • Pricing power of meeting customer needs better than competitors. • Builds Loyalty – barrier to entry

27. Marketing Advantage • Mostly about branding: • Building associations in the mind of the buyer that are: • Unique • Positive • Strong • Builds barrier to entry.

28. Also important to know customer views of competitors • Brand Mapping

29. Portfolio Analysis • Looks at business competitive position and market attractiveness based on share. • Looks at multiple SBUs. • Helps provide strategic direction for a firm’s SBUs.

30. BCG Growth-Share Matrix Stars Prob. Child R&D High Mkt Growth Rate Cash Cows Dogs Low 10 High 1.0 Low 0.1 Competitive Position (Share Ratio)

31. Expanded Portfolio Analysis

32. GE Market Attractiveness - Bus. Position Mkt Attractiveness: Low High Med. High Business Position: Ability To Compete Med. Low

33. Size Growth Share by Seg. Cust. Loyalty Margins Distribution Tech. Skills Patents Marketing Flexibility Culture Firm Capabilities Evaluating the Ability to Compete

34. Size Growth Cust. Sat. Level Competition: How much How intense Price Levels Profitability Technology Gov’t Regs. Sensitivity to Economic Trends Market Attractiveness

35. Strategies for GE Matrix. • Invest to Hold • Invest to Penetrate • Invest to Rebuild • Selective Investment • Low Investment • Divest.

36. Break Time Break Time 6.25 minutes