BY-Roshan Panta MBM 2nd Semester

Nepal Commerce Campus

CHAPTER 3 STRATEGIC MARKET SEGMENTATION AND

MARKET PLANNING CUSTOMER VALUE AND SATISFACTION

Customer Value: The difference between the values the customer gains

from owning and using a product and the costs of obtaining the product. IF the benefits they expect to receive exceed the expected costs

and effort involved in acquiring the product.

Customer value is the satisfaction a consumer feels after making a purchase for goods

or services relative to what she must give up to receive them. A consumer doesn't

consider value just in terms of money spent, but can also consider the time it takes to

obtain a purchased product and interactions with customer service personnel. Customer

value has several tiers and is best thought of as a hierarchy, according to Destination

Marketing's website. This hierarchy determines the importance of services in the mind of the

consumer in terms of what the consumer expects and does not expect from the purchase

experience.

Basic and Expected Levels

The first two tiers of customer value hierarchy encompass the basics of value what a

customer expects from the service experience. For a small or large business, the basics of

customer value are all the requirements of doing business -- having a clean retail location,

sufficient stock to provide a wide selection and adequate staff. What a customer expects from

a service experience varies by industry but usually involves competitive prices dictated by

competition in the market and convenient hours of operation. A business not providing these

basic and expected levels of value cannot build a high-quality service experience or value for

the customer.

Desired Customer Value

Desired value is the third tier of customer value hierarchy and involves what the customer

would like to have from the purchase and service experience. According to Destination

Marketing's website, desired value presents the first opportunity for a small business to move

ahead of competitors by giving the customer desirable add-on features to the purchase and

service experience. For example, a retail location may provide a consistently friendly

customer service experience with staff willing to hunt around the store with the customer to

find the right outfit or specific clothing item.

Unanticipated Customer Value

Unanticipated value for the customer is receiving a service or purchase experience that the

customer literally does not expect. These features can help a small business win consumer

loyalty over the competition and generate repeat sales over time. For example, providing

satisfaction guarantees on all purchases or hiring staff with significant expertise in the

business' industry can provide a customer with a service experience that exceeds both

expectation and desire in terms of value.

e.g. McDonald's is an well known brand for it's fast paced service. For buying McDonald's food, customer will think about food content, and the values against the money, effort and compare McDonald's with BurgerKing and Subway - and select the one that gives them the greatest delivered value.

Customer Satisfaction: The extent to which a product's perceived

performance matches a buyer's expectations. Customer might be dissatisfied or satisfied.

- If the product's performance falls short of expectations, the buyer is dissatisfied. - If performance matches or exceeds expectations, the buyer is satisfied or

delighted.

Customer satisfaction depends on a product's perceived performance in delivering

value relative to a buyer's expectation. Smart companies aim to delight customers

by promising only what they can deliver, then delivering more than they promise.

Customer Satisfaction measures how well the expectations of a customer

concerning a product or service provided by your company have been met.

Customer satisfaction is an abstract concept and involves such factors as the quality of the

product, the quality of the service provided, the atmosphere of the location where the product

or service is purchased, and the price of the product or service. Businesses often use customer

satisfaction surveys to gauge customer satisfaction. These surveys are used to gather

information about customer satisfaction. Typical areas addressed in the surveys include:

Quality of product

Value of product relative to price - a function of quality and price

Time issues, such as product availability, availability of sales assistance, time waiting

at checkout, and delivery time

Atmosphere of store, such as cleanliness, organization, and enjoyable shopping

environment

Service personnel issues, such as politeness, attentiveness, and helpfulness

Convenience, such as location, parking, and hours of operation

e.g. A customer of McDonald's expects quality food within short period of time after placing their order. If they get their food in hand within their expected time then they become satisfied. Otherwise, dissatisfied.

Customer satisfaction and value are both fundamental concepts in the understanding of

marketing. It is important to note that while they are highly interrelated, they also operate

independently.

Essentially, value is when a consumer perceives that they will get a good deal from the

company, brand, product or service. To put this in more marketing terms, the consumer will

see value when the benefits they expect to receive exceed the expected costs and effort

involved in acquiring the product.

Therefore, as potential customers (that is, the target market) will be attracted to the offering if

they perceive that the benefits exceed the cost (which equals value), the ability of a firm to be

able to offer good value is paramount to its success in generating ongoing new customers.

This means that value is a pre-purchase assessment of the product by the consumer. If a

consumer perceives that the product brand or service offers very little value based on their

pre purchase assessment OR if they perceive that it offers less value than a competitive

offering, then the consumer will not buy that particular item.

WHY CUSTOMER SATISFACTION IS IMPORTANT?

1. It’s a leading indicator of consumer repurchase

intentions and loyalty

Customer satisfaction is the best indicator of how likely a customer will make a purchase in

the future. Asking customers to rate their satisfaction on a scale of 1-10 is a good way to see

if they will become repeat customers or even advocates.

Any customers that give you a rating of 7 and above, can be considered satisfied, and you can

safely expect them to come back and make repeat purchases. Customers who give you a

rating of 9 or 10 are your potential customer advocates who you can leverage to become

evangelists for your company.

Scores of 6 and below are warning signs that a customer is unhappy and at risk of leaving.

These customers need to be put on a customer watch list and followed up so you can

determine why their satisfaction is low.

See how satisfaction provides so much insight into your customers?

That‟s why it‟s one of the leading metrics businesses use to measure consumer repurchase

and customer loyalty.

2. It’s a point of differentiation

In a competitive marketplace where businesses compete for customers; customer satisfaction

is seen as a key differentiator. Businesses who succeed in these cut-throat environments are

the ones that make customer satisfaction a key element of their business strategy.

3. It reduces customer churn

An Accenture global customer satisfaction report (2008) found that price is not the main

reason for customer churn; it is actually due to the overall poor quality of customer service.

Customer satisfaction is the metric you can use to reduce customer churn. By measuring and

tracking customer satisfaction you can put new processes in place to increase the overall

quality of your customer service.

4. It increases customer lifetime value

A study by InfoQuest found that a „totally satisfied customer‟ contributes 2.6 times more

revenue than a „somewhat satisfied customer‟. Furthermore, a „totally satisfied customer‟

contributes 14 times more revenue than a „somewhat dissatisfied customer‟.

Satisfaction plays a significant role in how much revenue a customer generates for your

business. Successful businesses understand the importance of customer lifetime value (CLV).

If you increase CLV, you increase the returns on your marketing dollar.

For example, you might have a cost per acquisition of $500 dollars and a CLV of $750.

That‟s a 50% ROI from the marketing efforts. Now imagine if CLV was $1,000. That‟s a

100% ROI!

Customer lifetime value is a beneficiary of high customer satisfaction and good customer

retention. What are you doing to keep customers coming back and spending more?

5. It reduces negative word of mouth

McKinsey found that an unhappy customer tells between 9-15 people about their experience.

In fact, 13% of unhappy customers tell over 20 people about their experience.

That’s a lot of negative word of mouth.

How much will that affect your business and its reputation in your industry?

Customer satisfaction is tightly linked to revenue and repeat purchases. What often gets

forgotten is how customer satisfaction negatively impacts your business. It‟s one thing to lose

a customer because they were unhappy. It‟s another thing completely to lose 20 customers

because of some bad word of mouth.

To eliminate bad word of mouth you need to measure customer satisfaction on an ongoing

basis. Tracking changes in satisfaction will help you identify if customers are actually happy

with your product or service.

6. It’s cheaper to retain customers than acquire new ones

This is probably the most publicized customer satisfaction statistic out there. It costs six to

seven times more to acquire new customers than it does to retain existing customers.

If that stat does not strike accord with you then there‟s not much else I can do to demonstrate

why customer satisfaction is important.

Customers cost a lot of money to acquire. You and your marketing team spend thousands of

dollars getting the attention of prospects, nurturing them into leads and closing them into

sales.

Why is it that you then spend little or no money on customer retention?

Imagine if you allocated one sixth of your marketing budget towards customer retention.

How do you think that will help you with improving customer satisfaction and retaining

customers?

Here are some customer retention strategies to get you thinking:

Use blogs to educate customers

Use email to send special promotions

Use customer satisfaction surveys to listen

Delight customers by offering personalized experiences

In terms of the buyer decision process (which marketing students will cover in consumer

behavior topics), this pre-purchase assessment occurs in the evaluation phase.

Customer satisfaction, on the other hand, occurs after the consumer has become a customer.

That means they have purchased the product or have had dealings with a service firm with.

Customer satisfaction is their assessment of how well that value was delivered – that is, did

they get the value that they expected to receive? In terms of the buyer decision process, this

customer satisfaction assessment occurs in the post-purchase phase.

MARKET RESEARCH

Market research exists to guide your business decisions by giving you insight into your

market, your competitors, your products, your marketing and your customers. By enabling

you to make informed choices, market research will help you to develop a successful

marketing strategy.

Market research helps you to reduce risks by getting product, price and promotion right from

the outset. It also helps you focus your resources where they will be most effective. here are

two main types of market research - quantitative research and qualitative research.

Quantitative research focuses on coming up with numbers: for example, what percentage of

the population buys a particular product. It is gathered using surveys and questionnaires. You

can do simple quantitative research yourself by talking to your customers. More in-depth

quantitative research can be used to identify markets and understand customer profiles - vital

if you're launching a new product.

Qualitative research gets behind the facts and figures to find out how people feel about

products and what prompts them to spend. Researchers use questionnaires and focus groups

to gather this intelligence, while interpreting the results is a skilled job.

You can also do desk research with existing surveys and business reports. Much information

is available online and from industry organisations, and some of it is free. This information

provides data on market size, sales trends, customer profiles and competitor activity. Your

customer records also provide a wealth of information, such as purchasing trends.

For forecasting, it can help you assess key trends to anticipate how the market may change.

This is a vital step towards identifying new market segments, developing new products and

choosing your target market.

Market research needs to be a regular planned part of your marketing. Even if you are an

established business, you need to stay in touch with your customers' needs as well as market

trends and your competitors. It measures the effectiveness of your own marketing, giving you

information about attitudes to everything from packaging and advertising to brand name

awareness.

Planning your market research

Effective market research starts with knowing what you are trying to achieve and what

information you need - whether you do your own research or brief a professional.

On a tight budget, you can take a do-it-yourself approach to market research. For example, if

you are considering taking on a shop, you can check the levels of passing traffic at different

times. Taking time to talk to your customers or potential customers is invaluable, too - this

free market research can be very revealing.

However, to get the intelligence to make sound commercial decisions, you'll need a more

sophisticated approach. For instance, if you carry out a market research survey, you'll need to

plan the best way to conduct it and how to interpret the results. What customers tell you to

your face may not be what they do, while your ability to interpret results is likely to be

compromised by your own feelings.

For a truly balanced approach, you should work with a professional market researcher, such

as an agency or a freelance consultant. If you are looking for detailed quantitative work, you

will probably need to work with a company. However, a freelance market researcher can be

cost-effective for a survey or focus group. Professional market researchers are skilled in

asking the right questions and interpreting the results, producing objective results that you

can act on with confidence.

MARKET RESEARCH FOR IDENTIFYING CUSTOMER

Before you start promoting your business you need to know what your customers want and

why. Good customer research helps you work out how to convince your customers that they

need your products and services. Your market research should help you understand your

potential customers. Further customer research can help you develop a more detailed picture

of them and understand how to target them. It will also highlight key characteristics your

customers share, such as:

gender

age

occupation

disposable income

residential location

recreational activities.

Market research can be used in identifying customer needs, as well as who they are. You

have to ask the right questions though. If you don‟t really know your customers you will not

retain them leaving you constantly chasing after new ones. Don‟t just follow your instincts as

many companies do. Use market research reports, focus groups and market surveys. Take the

time too really get to know them. Ask the right questions; get the facts; and discover how to

motivate your customers.

We are motivated by two things, praise or reward. It‟s kind of funny, whether you are 3 years

old or 43 years old, it‟s the same. I can make my son do chores or homework without a fight

simply by offering him ice cream. I know I am willing to go the extra mile for an adult

version of ice cream (for me that‟s the latest teckie gadget). Oh heck… who am I kidding?

Real ice cream still works for me too. The point is how do you motivate your customers?

Achieving this is not just as simple as asking the right questions. There are many details to

figure out and it is highly recommended that you use experienced researchers or consultants.

For example:

How do you define which customers to talk to?

How do you decide on a format for your research?

How do you know what type of questions to ask to get to know your customers?

What attributes or demographics are important in getting to know your customers?

How do you use the data once it is collected?

Let‟s take a look at the pros and cons of a few strategies to really get to know your

customers:

1. Surveys

Surveys are the staple of market research, however you have to know how and when to use

the three types of questions: Opened-Ended, Closed-Ended and Strategic.

Opened-ended questions can provide a lot of information, but often they do not provide all

the detail you need.

The short answers you get from Closed-Ended questions can often grind a conversation to a

halt.

Strategic questions tend to treat the customer as the expert and lead to a deeper conversation

which in turn helps you really know how you can help that customer. Giving the customer

more freedom in answering your question lets them provide you with their agenda (not

yours).

All three types of questions serve a purpose and are helpful. An experienced researcher

knows how to use them all to help you gather the best information about your customer.

Some things to avoid in surveys are leading questions. This type of question drives customers

to answer in a very specific or biased way which doesn‟t actually allow them to tell you how

they really feel. Also keep in mind that surveys are really good at gathering data such as how

much or how often, but they fail to convey your customer‟s feelings and emotions.

Of course you don‟t want to ask the wrong questions on your survey either. Figuring out the

right questions may require some research of its own.

2. Focus Groups

Focus Groups are also an essential part of market research and here too it is important to use

researchers that are well skilled in moderating and interpreting conversations. You will find

that experienced focus group facilitators have developed a sort of sixth sense about what‟s up

when watching or talking to a participant. Focus groups are great because they can really help

you understand how your customer interacts with your product.

Look out for dominators in a focus group. You really don‟t want the most talkative person to

mask the voices of the others in the group. A skilled moderator will be able to hear all the

voices in the group and prevent the most extroverted participants from forcing the less

talkative to feel like they have to agree with them.

Just like with surveys, be careful not to lead members of the group to an answer. You want

their unbiased opinions.

3. Ethnographic Studies

Ethnographic Studies are in depth interviews with your customers. They have some major

advantages over surveys and focus groups in terms of understanding consumers for the

simple reason that they allow liberal variations and follow up questions.

With this type of research the company actually observes the participant, which gives you 1st

hand knowledge about your customer.

This type of data gathering is tricky as it takes someone with great skill to correctly interpret

the ethnographic data. If the analysis is incorrect, you‟ll find you haven‟t learned much about

your customer or even worse what do you learn may be misleading.

Now, for the cherry on top of the ice cream, you simply have to analyze the data. Easy, right!

As long as you have skilled researchers that know how to interpret the data correctly you will

find that through market research you can know everything you need to know about your

customers. If you know your customers, you will know how to motivate them towards your

end goal!

MARKET SEGMENTATION

The process of defining and subdividing a large homogenous market

into clearly identifiable segments having similar needs, wants, or

demand characteristics. Its objective is to design a marketing mix that

precisely matches the expectations of customers in the targeted

segment.

Few companies are big enough to supply the needs of an entire market; most must breakdown

the total demand into segments and choose those that the company is best equipped to handle.

Four basic factors that affect market segmentation are

1. clear identification of the segment, 2. measurability of its effective size, 3. its accessibility through promotional efforts, and 4. its appropriateness to the policies and resources of the company.

The four basic market segmentation-strategies are based on

behavioral,demographic,psychographic, and geographical differences

There are several advantages of segmentation.

1) Focus of the Company – Segmentation is an effective method to increase the focus of a

firm on market segments. If you have better focus, obviously you will have better

returns. Numerous automobile companies have started focusing on small car segments. This

is nothing else but a company changing its focus for better returns. Thus companies base their

strategy completely on a new segment which increases its focus and profitability.

2) Increase in competitiveness – Naturally, once your focus increases, your competitiveness

in that market segment will increase. If you are focusing on youngsters, your brand recall and

equity with youngsters will be very high. Your market share might increase and the chances

of a new competitor entering might be low. The brand loyalty will definitely increase. Thus

market segmentation also increases competitiveness of a firm from a holistic view.

3) Market expansion – Geographic segmentation is one type of segmentation where

expansion is immediately possible. If you have your market strategy on the basis of

grography, then once you are catering to a particular territory, you can immediately expand to

a nearby territory. In the same way, if you are targeting customers based on their demography

(Ex – reebok targets fitness enthusiasts) then you can expand in similar products (Ex –

reebok expanding with its fitness range of clothes and accessories). Segmentation plays a

crucial role in expansion. You cannot expand in a territory when you have no idea of which

segment of customers you will be meeting.

4) Customer retention – By using segmentation, Customer retention can be encouraged

through the life cycle of a customer. The best example of this is the Automobile and the

Airlines segment. You will find major example of customer life cycle segmentation in the

Hospitality segment whether they be hotels, airlines, or hospitals. In India, Titan is an

example of products which are planned through the life cycle of a customer. From fast track

to Sonata and the high range watches, Titan has them by price segment as well as life cycle

segment. Thus a watch is available for any customer who enters a Titan showroom, whatever

be his age.

5) Have better communication – One of the factors of marketing mix which is absolutely

dependent on STP is Promotions or communications. The communications of a company

needs to be spot on for its TARGET market. Thus if you need a target market, you need

segmentation. Communication cannot be possible without knowing your target market.

Imagine if you had to make someone across a curtain understand what is politics. You would

go on about ruling parties, states, countries and politicians. And when the curtain is taken

aside, you find that the person across the curtain is a 5 year old kid. Is there any use talking to

him about politics? This shows why communication needs segmentation. If you dont

know your market segment, what is their demography, what is their psychology, where they

are from, then how can you form a communication message.

6) Increases profitability – Segmentation increases competitiveness, brand recall, brand

equity, customer retention, communications. Thus if it is affecting so many factors of your

business, then definitely it affects the profitability of the firm. Do you ever see people

negotiating in a Nike, Gucci or BMW showrooms? You wont. One of the USP‟s of these

brand is their segmentation. They are in fact targeting segments which have no need of

bargaining or negotiation. Thus their profitability is high.

In summary – Target the proper segment and you will walk away with a better company and

a higher profitability.

MARKETING SEGMENTATION PROCESS

1. Identify the target market

The first and foremost step is to identify the target market. The marketers must be

very clear about who all should be included in a common segment. Make sure the

individuals have something in common. A male and a female can‟t be included in one

segment as they have different needs and expectations.

Burberry stocks separate merchandise for both men and women. The management is

very clear on the target market and has separate strategies for product promotion

amongst both the segments.

A Garnier men‟s deodorant would obviously not sell if the company uses a female

model to create awareness.

Segmentation helps the organizations decide on the marketing strategies and

promotional schemes.

Maruti Suzuki has adopted a focused approach and wisely created segments within a

large market to promote their cars.

Lower Income Group - Maruti 800, Alto

Middle Income Group - Wagon R, Swift, Swift Dzire, Ritz

High Income Group - Maruti Suzuki Kizashi, Suzuki Grand Vitara

Suzuki Grand Vitara would obviously have no takers amongst the lower income

group.

The target market for Rado, Omega or Tag Heuer is the premium segment as

compared to Maxima or a Sonata watch.

2. Identify expectations of Target Audience

Once the target market is decided, it is essential to find out the needs of the target

audience. The product must meet the expectations of the individuals. The marketer

must interact with the target audience to know more about their interests and

demands.

Kellogg‟s K special was launched specifically for the individuals who wanted to cut

down on their calorie intake.

Marketing professionals or individuals exposed to sun rays for a long duration need

something which would protect their skin from the harmful effects of sun rays.

Keeping this in mind, many organizations came with the concept of sunscreen lotions

and creams with a sun protection factor especially for men.

3. Create Subgroups

The organizations should ensure their target market is well defined. Create subgroups

within groups for effective results.

Cosmetics for females now come in various categories.

Creams and Lotions for girls between 20-25 years would focus more on fairness. Creams and lotions for girls between 25 to 35 years promise to reduce the signs of

ageing. 4. Review the needs of the target audience

It is essential for the marketer to review the needs and preferences of individuals

belonging to each segment and sub-segment. The consumers of a particular segment

must respond to similar fluctuations in the market and similar marketing strategies.

5. Name your market Segment

Give an appropriate name to each segment. It makes implementation of strategies

easier.

A kids section can have various segments namely new born, infants, toddlers and so

on.

6. Marketing Strategies

Devise relevant strategies to promote brands amongst each segment. Remember you

can‟t afford to have same strategies for all the segments. Make sure there is a connect

between the product and the target audience. Advertisements promoting female

toiletries can‟t afford to have a male model, else the purpose gets nullified.

A model promoting a sunscreen lotion has to be shown roaming or working in sun for

the desired impact.

7. Review the behavior

Review the behavior of the target audience frequently. It is not necessary individuals

would have the same requirement (demand) all through the year. Demands vary,

perceptions change and interests differ. A detailed study of the target audience is

essential.

8. Size of the Target Market

It is essential to know the target market size. Collect necessary data for the same. It

helps in sales planning and forecasting.

SHORT PROCESS OF SEGMENTATION

Step 1: Identify segmented markets

The first step of the market segmentation process is to identify the segmented markets. It is

important to select the segmenting strategy that most accurately categorizes consumers according

to your product or service.

For example, suppose that your company manufactures infant safety seats. The decision to use the

age-oriented strategy to segment the market may not be effective because people become parents

at different ages. Promotions and advertising directed toward twenty-something parents may not

appeal to older couples with children.

Step 2: Analyze each segment

Step two of the market segmentation process is to analyze each segment. After identifying potential

market segments, it is important to research and analyze the consumers that comprise each

segment. You must determine the similarities that connect the members of each segment, and

identify the differences that separate one segment from another.

During the analyzing step, you should outline the buying habits, product usage rates, attitudes, and

lifestyle choices that represent a typical customer in each segment. Demographic and geographic

information will provide a clear customer profile to help you determine the market segment best

suited for your product or service.

Step 3: Evaluate market opportunities

The third step of the process is to evaluate your market opportunities. The customer profiles you

create help you identify the market segments that offer the sufficient benefits you need to achieve

company goals and objectives.

When evaluating each segment, you should consider your ability to reach the targeted consumer,

the number of potential customers within the segment, your ability to measure the segment's

progress, and the segment's compatibility with your company's mission.

During this step, you must also forecast your company's market share possibility in each segment. By

defining the sales potential, you can justify the need to secure the necessary resources to implement

your marketing strategy.

Step 4: Select target segments

The fourth step of the market segmentation process is to select the appropriate target segments.

The research, examination, and evaluation of the market segments allow you to evaluate the profit

potential of each segment. Once you select one or more target segments, you can develop products

and marketing strategies to satisfy your customers' needs

MARKET SEGMENTATION STRATEGIES

Once a business has identified its target market--the people most likely to purchase its goods and

services--it may divide the customers further using segmentation strategies. Customers in these

segments share one or more characteristics. Using this knowledge, the individual responsible for

marketing a small business develops specific plans to reach these targeted customers effectively.

Segmentation allows companies to build relationships and loyalty in customers by better providing

for their wants and needs. Although a company could use countless variables to segment its overall

market, there are a few variables that are most commonly used for customer segmentation.

The Demographic Strategy:Who?

Demographic segmentation involves dividing the customer market using variables such as

gender, age, income, level of education, occupation, socioeconomic status, type of family

(traditional, divorced, single parent), religion, language, culture and nationality. For example,

a product may succeed in one area of the country and fail in another due to the concentration

of a particular culture or nationality. Toys and clothes are usually marketed to particular ages

and genders, and some services are created specifically for those in a particular income

bracket (e.g. housekeepers, nannies, landscapers). If your target market is families with

young children, a demographic marketing strategy would have you searching for advertising

opportunities in magazines, online newsletters, websites and other publications that cater to

these families.

The Geographical Strategy:Where?

Geographical segmentation divides the market according to specific location, and can refer to

an overall country or state or can be divided further by neighborhood. Geographical

segmentation can also use variables like climate, size of city or town, rural or metropolitan

area, and type of landscape (mountainous, beachside or farmland). This allows companies to

determine the kinds of products that are useful or necessary in specific areas. For example, a

company specializing in surfboards and other beach sports equipment will focus its efforts on

states such as Florida and California where surfing is a popular sport. This strategy allows for

targeted communication as well. If the company is using billboards in a beach area, the

message is more likely to reach its intended target than placing the same billboard ad in the

middle of a city.

The Psychographic Strategy:Why?

The psychographic strategy divides the customer market according to values and lifestyles,

social status and personality type. This type of segmentation separates the market by how a

person living a certain lifestyle responds to the consideration and purchase of a product or

service. Interests, attitudes, opinions and values all contribute to a person's view toward a

product or service. For example, those with liberal political views may not be interested in a

new book authored by a very conservative author. Using this strategy, a company can present

its products in a way that makes them attractive to a particular group, according to their

status, personality or values. Higher social classes may be more open to additional services,

features and exclusive sales, as an example.

The Behavioral Strategy:How?

The behavioral segmentation strategy means that the company uses information obtained

regarding its customers' needs and their reaction to the needs. Behaviors may include

customer loyalty to a particular brand; paying the asking price for purchases or living on a

restricted budget; repeat purchases or first-time customer; or customers who are ready to

purchase or ready to compare to what they have seen elsewhere. Customers segmented using

this strategy may also be divided according to the way they use the product or service or the

intensity with which they use it -- for example, a customer who hires a cleaning service once

a week versus one who hires the same service once every six months. If a company realizes

that there is a need for additional choices from a line of products in order to provide more

variety to a loyal customer, it can develop the products based on the knowledge received via

this segmentation strategy.

IDENTIFYING AND SELECTING MARKET

SEGMENTATION STRATEGIES

Market for product is big and diverse making it difficult for companies to be able to satisfy

every customer. Companies need to identify a certain set of customer within a market and

work towards satisfying them. This set of identification is market segment. Companies

further need to understand the intricacy of how this segment behaves and operates. An

approach known as target marketing is gaining prominence where companies identify the

market segment on similar needs and wants, select one of the market segments and then focus

in developing products and marketing program.

Earlier business operation was in the form of mass marketing. In mass marketing companies

produce a product in large quantities and serve this product to as many consumers as

possible. This made sense as markets were developing and not much variety was on offering.

Now product offerings have under gone radical change thanks to advertising and

communication reach. Therefore, companies look forward to marketing at segment, niches,

local and individual level.

In segment marketing companies identify consumer with similar needs and wants. For

example, an airline is looking forward to providing no frills‟ connectivity between metro

cities on US east coast compare. This segment is within airline industry but needs of

customer is different. T target audience is low budget travelers. However, customers within

the segment look for different attributes, for example, lunch or beverages as part of travel.

Here companies can offer this by charging the customer.

In niche marketing, companies target limited customer set. A niche market is worth

exploring where customers are willing to pay a premium for product, entry barriers are high

and market has growth potential. In local marketing, customers are local neighborhood,

trading stores, etc. For example, many banks prefer local marketing for better understanding

of client and provide them right type of service. In individual marketing, companies look

forward to satisfying needs and wants of individual customer. Internet is facilitating the

process of individual marketing, where in customer log on to the site and creates products

from available options. This process is not feasible for high technology products like

automobiles.

The market segmentation task has to follow a scientific process.

The first task is to group customer according to product and service they want.

The second task is to analyze customer by summarizing demographic, lifestyle and

usage pattern, which helps in the definition of market segment.

The third task is due diligence of the market for growth potential, competition and

other factors.

The fourth task is to profitability of market segment.

The fifth task is to undertake positioning activity for pricing and marketing programs.

The sixth task is to explore different positioning and marketing strategies to explore

the market to its full potential.

There are various factors, which affect segmentation in a consumer market. Geographic is

one such factor, where a country is segmented on basis region, city, urban, rural and climate.

Demographically market is segmented on the basis of age, family size, gender, household

income, life stage, occupation, education, religion, race, generation and social class. Further,

segmentation can be done on the basis of lifestyle and personality traits. On an individual

level market can be segmented on the basis of attitude, belief and perception of products,

product awareness and usage pattern.

There are various factors, which affect segmentation in the business market. Demographic is

one such factor, which consists of type of industry, size of company and geographical

location of the company. Operational segmentation is on the technology class, customer

consumption and customer requirements. Purchasing methodology includes segmentation

based on purchase policy, purchase department structure, relation with companies and market

positioning of companies. The order Requirements lets segmentation be based on nature of

requirement and size of order. Personality trait segmentation looks at loyalty and risk profile.

Companies have to finalize target market in which it wants to operate. After which segments

have to be identified based of various factors as discussed. Once segments are identified, in-

depth evaluation analysis has to be done come for a conclusion, whether to target one or

several segments.

Positioning and Positioning Strategies

Positioning

Positioning is developing a product and brand image in the minds of consumers. It can also

include improving a customer's perception about the experience they will have if they choose

to purchase your product or service. The business can positively influence the perceptions of

its chosen customer base through strategic promotional activities and by carefully defining

your business' marketing mix.

Effective positioning involves a good understanding of competing products and the benefits

that are sought by your target market. It also requires you to identify a differential advantage

with which it will deliver the required benefits to the market effectively against the

competition. Business should aim to define themselves in the eyes of their customers in

regards to their competition

APPROACH TO POSITNING STRATEGY

There are seven approaches to positioning strategies:

(1) Using Product characteristics or Customer Benefits as a positioning strategy This strategy basically focuses upon the characteristics of the product or customer benefits.

For example if I say Imported items it basically tell or illustrate a variety of product

characteristics such as durability, economy or reliability etc. Lets take an example of

motorbikes some are emphasizing on fuel economy, some on power, looks and others stress

on their durability. Hero Cycles Ltd. positions first, emphasizing durability and style for its

cycle.

At time even you would have noticed that a product is positioned along two or more product

characteristics at the same time. You would have seen this in the case of toothpaste market,

most toothpaste insists on „freshness‟ and „cavity fighter‟ as the product characteristics. It is

always tempting to try to position along several product characteristics, as it is frustrating to

have some good characteristics that are not communicated.

(2) Pricing as a positioning strategy – Quality Approach or Positioning by Price-Quality –

Lets take an example and understand this approach just suppose you have to go and buy a

pair ofjeans, as soon as you enter in the shop you will find different price rage jeans in the

showroom say price ranging from 350 rupees to 2000 rupees. As soon as look at the jeans of

350 Rupees you say that it is not good in quality. Why? Basically because of perception, as

most of us perceive that if a product is expensive will be a quality product where as product

that is cheap is lower in quality. If we look at this Price – quality approach it is important and

is largely used in product positioning. In many product categories, there are brands that

deliberately attempt to offer more in terms of service, features or performance. They charge

more, partly to cover higher costs and partly to let the consumers believe that the product is,

certainly of higher quality.

(3) Positioning strategy based on Use or Application – Lets understand this with the help

of an example like Nescafe Coffee for many years positioned it self as a winter product and

advertised mainly in winter but the introduction of cold coffee has developed a positioning

strategy for the summer months also. Basically this type of positioning-by-use represents a

second or third position for the brand, such type of positioning is done deliberately to expand

the brand‟s market. If you are introducing new uses of the product that will automatically

expand the brand‟s market.

(4) Positioning strategy based on Product Process – Another positioning approach is to

associate the product with its users or a class of users. Makes of casual clothing like jeans

have introduced „designer labels‟ to develop a fashion image. In this case the expectation is

that the model or personality will influence the product‟s image by reflecting the

characteristics and image of the model or personality communicated as a product user. Lets

not forget that Johnson and Johnson repositioned its shampoo from one used for babies to one

used by people who wash their hair frequently and therefore need a mild people who wash

their hair frequently and therefore need a mild shampoo. This repositioning resulted in a

market share.

(5) Positioning strategy based on Product Class – In some product class we have to make

sure critical positioning decisions For example, freeze dried coffee needed to positions itself

with respect to regular and instant coffee and similarly in case of dried milk makers came out

with instant breakfast positioned as a breakfast substitute and virtually identical product

positioned as a dietary meal substitute.

(6) Positioning strategy based on Cultural Symbols – In today‟s world many advertisers

are using deeply entrenched cultural symbols to differentiate their brands from that of

competitors. The essential task is to identify something that is very meaningful to people that

other competitors are not using and associate this brand with that symbol. Air India uses

maharaja as its logo, by this they are trying to show that we welcome guest and give them

royal treatment with lot of respect and it also highlights Indian tradition. Using and

popularizing trademarks generally follow this type of positioning.

(7) Positioning strategy based on Competitors – In this type of positioning strategies, an

implicit or explicit frame of reference is one or more competitors. In some cases, reference

competitor(s) can be the dominant aspect of the positioning strategies of the firm, the firm

either uses the same of similar positioning strategies as used by the competitors or the

advertiser uses a new strategy taking the competitors‟ strategy as the base. A good example

of this would be Colgate and Pepsodent. Colgate when entered into the market focused on to

family protection but when Pepsodent entered into the market with focus on 24 hour

protection and basically for kids, Colgate changed its focus from family protection to kids

teeth protection which was a positioning strategy adopted because of competition.

Creating a Market Positioning Strategy

While every company‟s situation is unique, we know from long experience that there are

common criteria for a company‟s success in reaching and winning a market. Whether your

company is centered on consumer packaged goods, business services or emerging

technology, your part-time CMO and the Chief Outsiders team will consider the following

dimensions in developing a market positioning strategy:

Brand Positioning Strategy

Product Positioning Strategy

Competitive Pricing Strategy

Competitive Positioning Strategy

Alternatives to Marketing Consulting Firms

Brand Positioning Strategy: Brand Management or

Rebranding?

Positioning a brand is serious business. There are several key questions which have to be

answered in brand positioning. First, you determine WHAT dimensions are critical to the

positioning. This has everything to do with the target customers. What are the top two to five

core criteria for their decision making? Then, you need to understand WHERE the brand is

currently positioned, assuming you‟re already in market, against these brand criteria. Often

this sort of analysis is conducted to determine what GAPS are underserved, which presents a

potential positioning opportunity of WHERE you‟d like to be positioned. You then need to

determine if the new positioning opportunity is purely a matter of messaging (relating what

you do, why it‟s relevant, and how it‟s different) or a matter of bolstering your offerings.

This analysis might result in something as simple as identifying which products or features

are the primary reasons to buy, and rallying your offerings – even your company – around

this highly attractive dimension. In the end, you‟re trying to determine what your brand

should stand for. (Note: not all that you or your products and services can do.) Then, we‟ll

work on establishing how you‟ll deliver this brand positioning strategy in your marketing and

sales activities. Here are some terrific articles on other dimensions of brand strategy.

Product Positioning Strategy: Market Fit and

Differentiation

Good product positioning strategy requires looking both internally and externally. First, your

business as a whole needs to be properly positioned, then your product or services portfolio

needs to be positioned. Some companies fail to recognize that their own offerings need to

“hang together” and make sense – relative to one another and to your business overall. When

a company has diverging offerings or brands, they might best consider two different company

banners. Similarly, when companies try to extend the brand of a product in too many

directions they can dilute the value of the offering and confuse the customer. With a product

portfolio that makes sense, your business also needs to successfully differentiate each product

from its competition. Typically, there are three key dimensions to positioning: functionality,

relevance and differentiation. When offerings are new (perhaps based on new technology)

and not well understood, the positioning is around what the offering does (e.g., now you can

watch movies in high definition). When offerings are commodities, the positioning is around

your differentiation strategy, and in extreme cases, positioning around the emotional

experience (e.g., a beer might claim to be the coldest, which is not actually a unique attribute

of the product. It may then go further by putting a temperature gauge on the can to prove it‟s

cold.

Competitive Pricing Strategy: Pricing for Profit

Pricing strategy has its roots in the very heart of competitive positioning. If your company

boasts a better product or service and also leads in market reputation (or brand) then you have

the opportunity to command premium pricing. However, an initial question becomes: to what

degree are my customers price-sensitive? In many cases, especially in small or middle market

companies, the unique value your offerings bring may fully justify a premium price. On the

other hand, if you lack a competitive presence or are subject to a negative reputation, no

amount of pricing discount may equalize your handicap. Understanding these basic dynamics

in your competitive marketplace will allow you to create a model to inform your pricing

strategy – are you optimizing for volume, or margin, or for predictability? Your pricing

strategy may also allow for opportunistic situations such as capturing first order to prove

value for a longer term relationship. The main caution in developing a pricing optimization

strategy is this: don‟t make your sales organization your sole source of input. Dig deeper and

broader to ensure you have a balanced perspective.

Competitive Positioning Strategy: Look at The Whole

Picture

Positioning strategy, by its very nature, involves your value relative to your competition.

What do you do or offer that‟s better (or not as competitive) as others who offer similar

products and services? When these differences are identified, supported with proof points,

and properly merchandised your prospects will have an accurate and compelling basis to

compare your company to others. However, there is always more to understanding your

offerings than defining them in light of competitive offers. Companies can easily make the

mistake of “over positioning” their products and services. As there are three dimensions to

establishing value propositions – what it is you DO, why it‟s RELEVANT and how it‟s

DIFFERENT – companies, marketers and sales teams can focus too much attention on

differentiation before assuring the first two dimensions are understood. Your customers are

typically most interested in getting their problems solved. If it‟s not clear how you‟re going to

do that, comparing yourself to your competition (even subtly) won‟t matter

Leveraging Outside Experts for Compelling Market

Positioning Strategies

When developing strategies for market positioning, mid-market CEOs would do well to

solicit executive management consultants or top marketing consulting firms, rather than a

marketing agency or advertising firm. Solid work up front will ensure both effective and

efficient go-to-market planning and execution. An alternative to strategic consulting firms is

the use of fractional or part-time marketing executives. For more information on this fast

growing and cost-effective alternative,

Michael Porter's Generic Strategies of Positioning

If the primary determinant of a firm's profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that

industry. Even though an industry may have below-average profitability, a firm that is optimally positioned can generate superior returns.

A firm positions itself by leveraging its strengths. Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation. By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus. These strategies are applied at the business unit level. They are called generic strategies because they are not firm or industry dependent. The following table illustrates Porter's generic strategies:

Porter's Generic Strategies

Target Scope

Advantage

Low Cost Product Uniqueness

Broad

(Industry Wide) Cost Leadership

Strategy

Differentiation Strategy

Narrow

(Market Segment)

Focus Strategy (low cost)

Focus Strategy

(differentiation)

Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market.

Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership.

Firms that succeed in cost leadership often have the following internal strengths:

Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome.

Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process.

High level of expertise in manufacturing process engineering. Efficient distribution channels.

Each generic strategy has its risks, including the low-cost strategy. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. Differentiation Strategy

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily.

Firms that succeed in a differentiation strategy often have the following internal strengths:

Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived

strengths of the product. Corporate reputation for quality and innovation.

The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. Focus Strategy

The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly.

Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist.

Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well.

Some risks of focus strategies include imitation and changes in the target segments. Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may be able to carve out sub-segments that they can serve even better. A Combination of Generic Strategies - Stuck in the Middle?

These generic strategies are not necessarily compatible with one another. If a firm attempts to achieve an advantage on all fronts, in this attempt it may achieve no advantage at all. For example, if a firm differentiates itself by supplying very high quality products, it risks undermining that quality if it seeks to become a cost leader. Even if the quality did not suffer, the firm would risk projecting a confusing image. For this reason, Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies. Otherwise, with more than one single generic strategy the firm will be "stuck in the middle" and will not achieve a competitive advantage.

Porter argued that firms that are able to succeed at multiple strategies often do so by creating separate business units for each strategy. By separating the strategies into different units having different policies and even different cultures, a corporation is less likely to become "stuck in the middle."

However, there exists a viewpoint that a single generic strategy is not always best because within the same product customers often seek multi-dimensional satisfactions such as a combination of quality, style, convenience, and price. There have been cases in which high quality producers faithfully followed a single strategy and then suffered greatly when another firm entered the market with a lower-quality product that better met the overall needs of the customers. Generic Strategies and Industry Forces

These generic strategies each have attributes that can serve to defend against competitive forces. The following table compares some characteristics of the generic strategies in the context of the Porter's five forces.

Generic Strategies and Industry Forces

Industry

Force

Generic Strategies

Cost Leadership Differentiation Focus

Entry

Barriers

Ability to cut price in

retaliation deters

potential entrants.

Customer loyalty can

discourage potential entrants.

Focusing develops core

competencies that can act as an

entry barrier.

Buyer

Power Ability to offer lower

price to powerful

Large buyers have less power

to negotiate because of few

Large buyers have less power to

negotiate because of few

buyers. close alternatives. alternatives.

Supplier

Power Better insulated from

powerful suppliers. Better able to pass on supplier

price increases to customers.

Suppliers have power because of

low volumes, but a differentiation-

focused firm is better able to pass

on supplier price increases.

Threat of

Substitutes

Can use low price to

defend against

substitutes.

Customer's become attached to

differentiating attributes,

reducing threat of substitutes.

Specialized products & core

competency protect against

substitutes.

Rivalry Better able to

compete on price. Brand loyalty to keep

customers from rivals. Rivals cannot meet differentiation-

focused customer needs.

DEVELOPING POSITIONING

STRATEGIES:PROCESS

There are 6 main steps in positioning process.they are:

(1) Identifying the Competitors – A first step is to identify the competition. This step is not

as simple as it seems to be. For example, „Pepsi „ might define its competitors as follows:

(1) Othercoladrinks

(2) Non-dietsoftdrinks

(3) Allsoftdrinks

(4) Non-alcoholicbeverages,

(5) All beverages except water

One thing, which should be clear to you, is that there is basically two types of competitors

-Primary competitors i.e., competitors belonging to the same product class

-Secondary competitors, those belonging to other product category.

In the above example other cola drinks are primary competitors and other drinks and

beverages are secondary competitors.

2) Determining how the Competitors are Perceived and Evaluated – The second step is

related to determining the product positioning which is basically done so as to see, when the

competitors products are purchased by the customers. It is to see comparative view. An

appropriate set of product attributes should be chosen. The term „attributes‟ includes not only

product characteristics and consumer benefits but also product associations such as product

use or product users. In any product category, there are usually a host of attribute

possibilities.

(3) Determining the competitor’s positions – Our next focus should be to determine how

different brands (including our own brand) are positioned with respect to the relevant

attributes selected under the previous step. At this point we should be clear about what is the

image that the customer has about the various product brands? You have to see how are they

positioned in respect to each other? Which competitors are perceived as similar and which as

different? This judgment can be made subjectively. However a research can be taken up for

getting the answer of these questions.

(4) Analyzing the Customer – Now you need to analysis the customers habits and behaviour

in a particular market segment. The following questions need attention while understanding

the customer and the market – (i) how is market segmented? (ii) What role does the product

class pay in the customers life style? What really motivates the customers? And what habits

and behavior patterns are relevant?

The segmentation question is, of course, critical. There are various approaches to

segmentation but out of all benefit segmentation is relevant here, which focuses upon the

benefits or attributes that a segment believes to be important. In order to specify that benefit

segments, it is useful to highlight the role of „ideal object‟ as a tool.

(5) Making the positioning Decision – The above four steps provide you a useful

backgrounds and are necessary to be conducted before taking any decision about positioning.

The managers can carry these steps or exercises. After these four exercises, the following

guidelines can be offered to reach a positioning decision: –

(i) An economic analysis should guide the decision.

(ii) Positioning usually implies a segmentation commitment.

(iii) If the advertising is working, the advertiser should stick to it.

(iv) Do not try to be something, your are not.

(v) In making a decision on position strategy, symbols or set of symbols must be considered.

(6) Monitoring the position – An image objective, like an advertising objective should be

measurable. It is necessary to monitor the position overtime, for that you have variety of

techniques that can be employed it can be on the basis of some test and interviews which will

help to monitor any kind of change in the image.

Thus, the first four steps in the positioning process provides a useful background. The fifth

one only is taken to make the position decision. The final step is to evaluate and measure and

follow up.

STRATEGIC MARKET PLANNING:PROCESS

Strategic marketing planning is the process that the operational and managerial staff of a company

goes through to create and implement effective marketing strategies. Strategic marketing planning

takes several aspects of company marketing and promotion into consideration. The aspects that

contribute to strategic marketing planning include identifying promotional opportunities and

evaluating the marketing opportunities; researching, analyzing and identifying the target markets;

developing a strategic position for the company to pursue and how to implement the strategy;

preparation and implementation of the marketing plan; and measuring and evaluating the results of

the marketing efforts of the company

1. Set your marketing goals. Once you‟ve decided to market your practice, you need to set

realistic and measurable goals to achieve over the next 18 to 24 months. This time span

allows you to plan activities around community events that are in line with your marketing

goals. For example, you might help sponsor an annual walkathon for breast cancer or speak at

your community‟s annual health fair. Because of the rapid changes occurring in the health

care environment, we don‟t recommend planning specific activities more than two years in

advance. One way to define your goals is to separate them into the following three categories:

immediate, one to six months; short-term, six to 12 months; and long-term, 12 to 24 months.

Here are some examples of measurable goals:

Increase the number of new patients seen in the practice by 5 percent within the first

six months and 10 percent by the end of the first year.

Shift your patient mix by expanding the pediatric and adolescent patient base from 15

percent to 25 percent of total patient visits within 18 months.

Increase your gross revenue by 30 percent within 24 months.

Improve your practice‟s image, which may be measured by “before” and “after”

scores on a community survey or by reviews from focus group participants.

It‟s important to share these goals with your staff members. They can tell you from their

perspectives whether they believe the goals are reasonable. If you want your marketing plan

to be successful, your staff needs to support your efforts to achieve the marketing goals.

2. Conduct a marketing audit. A marketing audit is a review of all marketing activities that

have occurred in your practice over the past three years. Be as thorough as possible, making

sure to review every announcement, advertisement, phonebook ad, open house, brochure and

seminar and evaluate whether it was successful.

3. Conduct market research. The purpose of market research is to draw a realistic picture of

your practice, the community you practice in and your current position in that community.

With this research, you can make fairly accurate projections about future growth in the

community, identify competitive factors and explore nontraditional opportunities (such as

offering patients nutritional counseling, smoking-cessation programs or massage therapy).

Your research may even bring to light some problem areas in your practice as well as

solutions you can implement right away. (See “A guide to market research” to find out what

kind of information you need to gather and where to find it.)

Conducting market research is often the most time-consuming step in this process. However,

it‟s also one of the most important steps. It‟s from this research that you‟re able to find out

what your practice does best and what you need to work on, what the needs of your

community are, who your practice should be targeting and how you should go about it.

4. Analyze the research. Next, you need to analyze the raw data you collect and summarize

it into meaningful findings that will be the foundation for determining which marketing

strategies make the most sense and will get the best results for your practice The research will

identify the wants and needs of your current and potential patients and will help you to define

your target audience (for more on target audiences, see step 5, below). This is also a good

time to look back at the goals you‟ve chosen. Based on your research findings, you may need

to modify some of your goals.

A strategic marketing plan requires that your practice be defined in terms of what it does for

patients. The research analysis will reveal your practice‟s strategic advantages. After looking

closely at your own practice as well as your competitors‟, you can ask yourself some key

questions: What are the similarities and differences between your practice and your

competitors‟? What sets your practice apart from your competition? Is your location more

desirable than your competitors‟? Do you offer a broader scope of services than the

competition? Is there a service you provide that no one else in the community currently

offers? Your competitive edge may lie in your style of practice, the range of services you

offer, the ease of making an appointment or the way you and your staff communicate with

patients.

5. Identify a target audience. With the help of your market research analysis, you should be

able to identify your practice‟s “target audience,” which is the specific group of patients to

which you‟d like to direct your marketing efforts. Your target audience might include patients

of a certain age, gender, location, payer type or language/ethnicity and patients with certain

clinical needs. Keep in mind that your target audience should not only be the patients you

want to attract but also the people who can influence and provide exposure to that segment of

the population. For example, if you wish to treat patients with arthritis, you might want to get

involved in the local and regional Arthritis Foundation and explore senior organizations in

the community. If you want to treat young athletes, you might consider giving talks on sports

safety and first-aid tips to coaches and athletes at the local high schools, colleges and

YMCAs. The key to marketing lies in targeting the audience that your practice can serve

better than your competition – and communicating this to that group.

6. Determine a budget. Before you can decide what specific marketing strategies you want

to implement to achieve your goals, you need to examine your financial information and

come up with a marketing budget. Marketing budgets vary by the type of market a practice is

in, the age of a practice and whether the practice has marketed before. There‟s no standard for

how much a practice should spend. However, in our experience, practices in open markets

have spent 3 percent to 5 percent of their annual gross incomes on marketing. If your practice

is new, in a highly competitive market or has never been marketed before, or if you intend to

roll out an ambitious new program or service, you can expect to spend 10 percent or more of

your annual gross income the first year you implement the plan.

Some of the initial marketing activities can be expensive. For example, it can cost more than

$5,000 to have a corporate image package (i.e., logo, stationery and collateral pieces)

developed by a professional and as much as $10,000 if you add a brochure. On the other

hand, some of the best marketing activities cost practically nothing. For example, to build

your referral network, you might try meeting with new physicians in your community and

sending follow-up/thankyou notes to referring physicians. Big or small, these are all

worthwhile investments that will give the community a positive image of your practice.

7. Develop marketing strategies. With your budget in place, you can begin to define

specific marketing strategies that will address your goals, reach your target audience and

build your patient base. Remember to focus your strategies on the elements of your practice

that can be used to create a special value in the minds of patients and referral sources. Each

strategy should be related to a specific goal and should be made up of numerous actions. For

example, one strategy related to the goal of increasing patient satisfaction might be to make

the office more patient friendly. The actions required for that strategy might include the

following:

Provide patient satisfaction training sessions to staff;

Develop a patient self-scheduling system within the practice Web site to eliminate the

need to telephone the office for an appointment;

Improve the reception-room decor;

Provide name tags for staff;

Require staff to introduce themselves to each new patient;

Conduct post-encounter telephone interviews with new patients within three days of

their appointments.

8. Develop an implementation schedule. An implementation schedule is a time-line that

shows which marketing actions will be done when and by whom. The schedule should also

include the cost of each marketing action and how it fits into the budget estimates for the 24-

month period. When creating the schedule, carefully consider how the activities will affect

the current practice operations and whether there are sufficient resources (such as staff, time

and money) to accomplish the necessary tasks. In some cases, it may be necessary to whittle

down the list or postpone some activities. In other cases, it might be best to go ahead with full

implementation of your plan. If you want to fully implement the plan but don‟t quite have the

staffing resources, you might consider bringing in a consultant to coordinate the marketing

activities and/or adding a part-time staff member to handle the majority of the marketing

tasks. The implementation schedule will also give you a basis on which to monitor the

progress of your marketing plan.

9. Create an evaluation process. The value of a marketing plan is its effectiveness, which

requires deliberate and timely implementation and monitoring and evaluation of results. It‟s

important to measure your results against the standards you set in establishing your goals.

Review your plan periodically (we recommend quarterly) by comparing your progress with

the implementation schedule. There are several ways you can measure the results of your

progress: patient survey scores, referral sources, increased income, increased new patients

and decreased complaints.

If at any time you find your progress does not measure up to your expectations, you need to

determine why. Perhaps the advertisement about a new service you are marketing has not

attracted new patients. If the ad campaign has been carried out as directed without results,

dump the campaign and try other actions. Perhaps you‟ll want to try giving a series of

seminars specifically targeted to the group you want to attract or developing a new segment

on your Web site for patients that describes the benefits of the new service. You may even

find that if each physician in the practice talks about the new service with his or her patients

as merely informational conversation, favorable results will follow. In other words, the

actions – and even the strategies and goals – in the marketing plan are not written in stone.

By regularly monitoring and evaluating each action, you can always change and try new

approaches.

Developing the Strategic Marketing Plan: Summary The strategic marketing plan process typically has three stages:

1. Segment the market Geographic Demographic Psychographic Behavior

2. Profile the market segments Revenue potential Market share potential Profitability potential

3. Develop a market segment marketing strategy Market leader or product line extension Mass marketing or targeted marketing Direct or indirect sales

After analyzing market segments, customer interests, and the purchase process, it's time to create

the strategic marketing plan. The strategic marketing plan document usually includes:

Situational Analysis - Where is the company now? a. Market Characteristics b. Key Success Factors

c. Competition and Product Comparisons d. Technology Considerations e. Legal Environment f. Social Environment g. Problems and Opportunities

Marketing Objectives - Where does management want the company to go? a. Product Profile b. Target Market c. Target Volume in Dollars and/or Units

Marketing Strategies - What should the company do to achieve its objectives? a. Product Strategy b. Pricing Strategy c. Promotion Strategy d. Distribution Strategy e. Marketing Strategy Projection

How to Use a Strategic Marketing Plan

Once a company's executive team has approved the strategic marketing plan it's time to take the

next step -- create the tactical marketing programs and projects needed to implement the plan.

These tactical programs usually include:

Product Development Plan Marketing Communications Plan Sales Development Plan Customer Service Plan