mktg strat lec-intro&stpd-ahb

Marketing StrategyMarketing Strategy--IntroductionIntroduction

Abhishek BhideB.E. (Cons); PGP (Indian School of Business)

1Abhishek Bhide- Mktg Strategy- MET-eMBA

AgendaAgenda� Introduction� Topics to be covered in this Course; Format� What is marketing ? What is strategy?� Why is it relevant?� How does it connect to Execution?� How does it connect to Execution?

2 Abhishek Bhide- Mktg Strategy- MET-eMBA

Be Slow, clear and Soft

INTRODUCTIONINTRODUCTION

Abhishek Bhide- Mktg Strategy- MET-eMBA 3

Rules & MarksRules & Marks� Respect for each other� Only One person talks at a time� No personal remarks even if you disagree� Debates over concepts and examples are welcome just

lets not degrade them into arguments

� MARKS:◦ 50 marks written paper at term end◦ 50 marks divided over 3 presentation to be done by each group

Abhishek Bhide- Mktg Strategy- MET-eMBA4

This will ensure a better atmosphere and better discussions. I might allot some of those 50 marks for any interesting observations during class

What is Marketing?What is Marketing?Philip Kotler:“The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.”

The Chartered Institute of Marketing (CIM):The Chartered Institute of Marketing (CIM):Marketing is the management process for identifying, anticipating and satisfying customer requirements profitably.

Sergio Zyman, ex-CMO, Coca Cola:“The sole purpose of marketing is to sell more to more people, more often and at higher prices. There is no other reason to do it.”


A step back- what is marketing? As a layman- now as an MBA? Which is the best example of marketing that you have seen? What was the strategy behind it? What is ‘Marketing’ mean to you? Clear this concept up- 5 mins Kotler- Formal more accepted definition; Your thoughts? Is Sales part of it? Institute- ‘management process’ –’profitably’ very important Zyman- more practical- simple- but do you agree? Is there any other reason- what about loyalty? Brand building? Image? How about employee marketing? Talk about Zyman’s blunder- New Coke- 77 days reversed decision

Strategy?Strategy?Oxford Dictionary:“A plan of action designed to achieve a long-term or overall aim”

Peter Drucker:"Strategic planning is the continuous process of making present entrepreneurial (risk-taking) decisions systematically and with entrepreneurial (risk-taking) decisions systematically and with the greatest knowledge of their futurity; organizing systematically the efforts needed to carry out these decisions; and measuring the results of these decisions against the expectations through organized, systematic feedback."


Strategy- a oft-used word. What does it mean in corporate / business terms? Required at every level- meeting, product, product group, SBU, company

What does ‘Marketing Strategy’ mean?What does ‘Marketing Strategy’ mean?

� A strategy that integrates an organization's marketing goals into a cohesive whole. Ideally drawn from market research, it focuses on the ideal product mix to achieve maximum profit potential. The marketing strategy is set out in a marketing plan.

� Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.


Goal integration- so that the company is behind it in terms of resources. What does market research do? Profit potential- selling at higher prices remember? Same thing is 2nd one- ‘greatest opportunities’ Another interesting term: sustainable….adv. Dissect those words- we will get into these details in later classes Is there any strategy which is not Mktg strat? Maybe a few- accounting methods, changing vendors, employment policies- BUT a majority have marketing implications!

Examples:Examples:Mission statements based on Marketing Strategies:� Coca Cola:

Wants to capture share of the stomach rather than share of the beverage market

� Xerox: Wants to help office productivity rather than help Wants to help office productivity rather than help copying documents

� Columbia Tristar: Wants to entertain people rather than make movies


Coca-cola- have you seen evidence of this? Buying ‘Minute Maid’ in 1960; Have over 500 brands from water to ginseng teas, energy drinks etc..P&G & Coke formed JV in 2001 for snacks- abandoned-WHY? Quote from article: “The company laid off 6000 workers (21 per cent of the workforce) in its Atlanta headquarters, giving more power to local managers. This strategy has been called a ‘multilocal’ strategy, more in keeping with the company’s changing markets, as 70 per cent of sales are outside North America” Any other company following this strategy? Lehar, Kurkure BUT also Pepsico owns Frito Lays and Quaker’s-Strategic or just diversification? Discuss Xerox acquiring other companies? Copying -> document company-> improving productivity. Started as a copying company. Today what does it do: Think about these next time you see such things Columbia Tristar – what does it mean for them? You find out.

Coca ColaCoca Cola� http://en.wikipedia.org/wiki/List_of_Coca-Cola_brands


So many brands but NOT snacks? Why? Any reason? Any advantage- strategic decision so as to not compete with complementary brands which are associated with them? Pepsi sold off Pizza Hut, Taco Bell’s & KFC to a separate entity for same reasons.

XeroxXeroxCurrent products

Xerox today manufactures and sells a wide variety of office and production equipment including LCD

Monitors, photo copiers, Xerox Phaser printers, multifunction printers, large-volume digital printers

as well as workflow software under the brand strategy of FreeFlow. The impact of Xerox FreeFlow

products on the graphic arts market and the print industry in general has grown exponentially since

May 2006, largely as a result of the Xerox presence at IPEX 2006. Xerox also sells scanners and


May 2006, largely as a result of the Xerox presence at IPEX 2006. Xerox also sells scanners and

digital presses. On 29 May 2008, Xerox launched the Xerox iGen4 Press.

Xerox sells both color and black and white printers under the Xerox Phaser and ColorQube brand,

with the color consumer model starting at US$299; the most expensive color model costs US$6,799.

Xerox also produces fax machines, professional printers, black and white copiers, and several other

products.

In addition, Xerox produces many printing and office supplies such as paper in many forms,

and solid ink that takes advantage of 2400 FinePoint technology; and markets software such

as Xerox DocuShare, Xerox MarketPort and FlowPort, offers consulting services, ECMDigital

Repository Services and printing outsourcing.

What else can they do? What other products? Ansoff’s matrix These are the sort of questions I expect you to answer in your presentations

A DA D--II--Y approach to strategy:Y approach to strategy:A simple way of creating a marketing strategy on a

website:

� Describe your company's unique selling proposition (USP).

� Define your target market.Define your target market.� Write down the benefits of your products or services.� Describe how you will position your products or

services.� Define your marketing methods. Will you advertise, use

Internet marketing, direct marketing, or public relations?

Source: http://marketing.about.com/cs/advertising/ht/5steps2strategy.htm


This is what most people –entrepreneurs would do- a simple method- in a way probably how ‘mktg strat’ started in the first place Captures a lot- that’s why I put it here. A could place to start

The Systematic ApproachThe Systematic ApproachA marketing strategy is a part of a Marketing Plan which consists of:

� Executive summary & Table of contentsBrief summary an contents of the plan

� Situation analysisInternal & external factors used to carry out a SWOT analysis

� Marketing strategy� Marketing strategy� Financial projections

Details of expenses required and revenues expected in detail

� Implementation controlsMilestones and implementation details as well as corrective measures that can be taken if required


This is how it is put across in a company- by a product manager or an SBU head. Often involves the entire marketing team + senior management before it is formalized. The beginning for new product or re-think on strategy is the SWOT or even a simple pros & cons analysis Explain other items- control and modifications just as important

Marketing Strategy:Marketing Strategy:� Mission Statement� Marketing Objectives� Financial Objectives� Target Markets� Positioning� Strategy description� Marketing Mix� Marketing Research


Mission St: A short statement about what the strategy needs to do; Mktg objectives- specifics related to sales per area, penetration, market awareness, brand equity etc Fin obj: related to revenues & profitability Target markets: What segments are being targeted and why? Positioning: How is the product being differentiated? Why that POD? Description: A description of how we will go about the strategy Mix: 4Ps- price, product, promotion, place- specifics of each Research- talks about the research done or to be done during the Product life cycle- this can then be related back to the implementation controls

Porter’s Generic StrategiesPorter’s Generic Strategies

Overall Cost Leadership

Differentiation


Focus

Cost leadership- Keeping costs as low as possible – problems with this strategy? Differentiation- Provide a high feature product to command higher prices. Examples? Mercedes? Ferrero Rocher Focus- Focus on some segments (geographic, psychographic etc.) with products developed for those segments. Ferrari- only sports cars. ISB- only post graduation management courses. You might be able to develop a cost advantage as a result of focus. China- manufacturing hub- further cost leadership by specializing on a particular garment

HOW DO WE START?HOW DO WE START?Creating a Marketing Strategy


DEVELOPMENT OF MARKETING STRATEGYDEVELOPMENT OF MARKETING STRATEGYThis is where we can start:


Traditional process- What was the strategy? Production based: What does it entail: I have a product- how do I sell it? We will look at the second diagram later Leads to the question- does every company need a marketing strategy?

Relevance of Marketing Strategy?Relevance of Marketing Strategy?� Do we always need Marketing Strategy?

Does SAIL or Coal India Ltd need it?◦ In Monopolistic/ Oligopolistic Markets

Does a civil contractor or a rickshaw meter supplier need it?◦ In Markets where prices are controlled

Does TATA salt or Balrampur Chini need it?◦ In commoditized product markets


Monopolistic markets- supply is still limited so who do I sell to? What price? What are the substitutes? What are the entry barriers? – strategy will give you these answers Price controls- Where will I incur least marketing cost?- low distribution costs? Faster sales cycle? Any complementary products that I can sell? Commodity- similar to price controlled- Also can I differentiate- may NOT give me higher margins but can increase revenues. Example even in electronics or cell phones- brand names don’t give much premiums but higher revenues- 5-6 big brands v/s local players

STRATEGIES THAT WE STRATEGIES THAT WE WILL DISCUSSWILL DISCUSS


These can be considered marketing strategies in themselves or part of a marketing strategy at an organization level. STPD is what we will start with and then get into these others.

Marketing ExecutionMarketing Execution� What happens at the ground level?

◦ Lack of communication◦ Unviable tactics or strategies◦ Lack of training for implementing new strategies◦ Insufficient time to change◦ Insufficient time to change


Do you think this is true? Why do you think it might happen?

References:References:1. http://www.businessdictionary.com/definition/marketing-

strategy.html#ixzz232TG4yLC

2. www.wikipedia.com

3. Aboutmarketing.com

4. Kotler & Keller Marketing Management e13


Segmentation, Targeting, Segmentation, Targeting, Positioning & DifferentiationPositioning & Differentiation

Abhishek Bhide; B.E. (Cons), PGP (ISB)

21Abhishek Bhide- Mktg Strategy- MET-eMBA

Getting into more details of a core marketing strategy today. Lets try to be a little quieter and more involved Look at all aspects of Segmentation today and possibly part of next lecture SPEAK SLOWLY- PAUSE- ALLOW INPUTS

Columbia TriColumbia Tri--StarStar� Acquired stake in New World Entertainment� Formed Columbia TriStar HomeVideo for video

cassettes and became #1 in two years� Columbia Tristar International formed to dub serials for

German markets

� What more can it do?


They want to entertain: Think about avenues- did you research the internet? New World- co making serials so another avenue for entertainment plus daily usage as compared to movies Home Video- think about it as a strategic move- already have a library Expanding into other languages- appeal of stars is often global What more can they do?

WHAT? CAN YOU EXPLAIN?WHAT? CAN YOU EXPLAIN?

Philip Kotler:

Even the most well-defined segments are partly fiction


Why? We are trying to predict ppl actions- so uncertainty- hence the need for strategy Not a perfect science- in every segment some ppl will behave differently- we need to remember that So no CORRECT answer! Just a call- the grey areas in marketing

SegmentationSegmentation

� What is Segmentation?Market segmentation is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and applications for the relevant goods and services

“The overall intent of Market Segmentation is to identify groups of similar customers and potential customers; Ø to prioritize the groups to address;

Ø to understand their behavior

Ø to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment.”


Segment is not a sector- sector is just a slice of population- college going males; middle income families- it does not even try to connect with needs Product life cycle concept- Why? If its new product you start from scratch but segmentation can be done for relaunch or as part of the control & implementations!

Market PreferencesMarket Preferences

8-25

What do you do in each case-Can you segment Homo- how do you segment? Price? Differentiate your product? Is it a function of time?-will it change from A to C over time? Can marketers drive that change? Example- Freeze dried coffee- best example Ipod for user interface Diffused- leads to formation of niche brands or naked + options type of product= examples- Home interiors & furnishings Clothes- especially ladies suits Essentially any made to order good Clustered is ideal for segmentation! But I cannot segment by these attributes-that’s the challenge

Why Segment?Why Segment?� Better matching of customer needs

Customer needs differ. Creating separate offers for each segment makes sense and provides customers with a better solution

� Enhanced profits for businessCustomers have different disposable income. They are, therefore, different in how sensitive they are to price. By segmenting markets, businesses can raise average prices and subsequently enhance profitsprofits

� Better opportunities for growthMarket segmentation can build sales. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product


1- Customer delight- lead to loyalty, product leadership etc. 2- Price discrimination- find out just how much they will pay? 3-

Why Segment?Why Segment?� Retain more customers

Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns. By marketing products that appeal to customers at different stages of their life ("life-cycle"), a business can retain customers who might otherwise switch to competing products and brands

� Target marketing communications� Target marketing communicationsBusinesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that (1) the key customers are missed and (2) the cost of communicating to customers becomes too high /

unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost


Why Segment?Why Segment?� Gain share of the market segment

Unless a business has a strong or leading share of a market, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.


Requirements of SegmentsRequirements of Segments

Measurable

Substantial


Accessible

Differentiable

Actionable

Why are all these attributes required?

Ways of Segmentation?Ways of Segmentation?� Geographic segmentation

The market is segmented according to geographic criteria—nations, states, regions, countries, cities, neighborhoods, or zip codes. Geo-cluster approach combines demographic data with geographic data to create a more accurate profile.With respect to region, in rainy regions you can sell things like raincoats, umbrellas and gumboots. In hot regions you can sell summer wear. In cold regions you can sell warm clothes.

� Demographic SegmentationDemographic segmentation consists of dividing the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality. As one might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer groups. This is partly because customer wants are closely linked to variables such as income and age. Also, for practical reasons, there is often much more data available to help with the demographic segmentation process.


Geo- But remember it is understanding the lifestyles & habits of those pop groups or clusters that is the key. Can you think of such clusters. Colonies where only parents of NRIs live? Great marketing opportunity? Demo-Common because easier to do with a decent success rate or application; Easiest to find numbers for because of availability of Data. Also cause a lot of existing media is designed around demographic segmentation Gender bases- Women will pick up products more quickly BUT men are more likely to read the product info Age- same age might have different life stage so again not perfect Income- blue collar workers bought colour TVs before richer middle class. Why? Cheaper than movies

Ways of SegmentationWays of Segmentation� Psychographic Segmentation

Psychographics is the science of using psychology and demographics to better understand consumers. Psychographic segmentation: consumer are divided according to their lifestyle, personality, values. Aliens within the same demographic group can exhibit very different psychographic profiles.

� Behavioral Segmentation

In Behavioural segmentation buyers are divided into groups on the In Behavioural segmentation buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. The variables of behavioral segmentation are:

1. Occasions2. Benefits3. User Status4. Usage Rate5. Buyer-Readiness Stage6. Loyalty Status7. Attitude


Psycho- A combination of key demo plus values, beliefs and lifestyles. Talk about behavioral loyalty v/s attitudinal loyalty A better but more difficult to plot or find as compared to pure demographics Behavioral – Highly specific to response of product. Occasions- these are triggers, juice for b’fast, travel for holiday etc. Benefits- what do I want apart from the basic product- augmented- petrol purchase eg. User status- some products have no repeats, some do Usage rate- heavy, regular, occasional Readiness- Loyalty- very, split, variety seeking Attitude- enthu, positive, indiff, negative, hostile

Behavioral Segmentation BreakdownBehavioral Segmentation Breakdown


A graphical way of looking at user readiness and usage rate Is this the ideal segmentation? Does it work all the time? What are the issues?

MarutiMaruti SuzukiSuzuki-- Segmentation?Segmentation?� Alto

� Swift Dzire

� Kizashi


Is this based on segmentation and targeting? Where do other Maruti brands fit in? Different Needs? Trade up opportunities? At the very beginning- 800 & 800 Dx were options for 1st time buyers- the richer ones opting for Dx The Van was targeted at small businesses & ambulances etc. The Gypsy was targeted as an SUV and for armed forces Later modernised offerings in view of competition- stuck to core markets of value oriented customers- wagonR, A-Star, Estilo- do they different image? Branding discussion? Lost out on premium market because of the same- Kizashi –does not sell! Vitara- again not a hot-seller END IF POSSIBLE

Segmentation of Older peopleSegmentation of Older people� A more complex problem- Why?� Can attracting older people damage the brand image?

How?� Are they more loyal?� Can it afford to ignore them?


Segmenting across international Segmenting across international boundariesboundaries� What is the need?� What would be the challenges?� What would change in the 4 P’s?:◦ Price◦ Packaging◦ Promotion◦ Promotion◦ Place

� Examples you know or use?


References:References:� Marketing Management – Kotler & Keller� Wikipedia� Tutor2u.net� ISB Study materials


Demographic SegmentationDemographic Segmentation--WHY?WHY?

� Demographic Segmentation:

◦ Reasonably co related to behaviours◦ Easy to obtain data and population sizes for each◦ Easy to complement with products already using ◦ Easy to complement with products already using demographic segmentation


Demographic segmentation is ‘just right’ in terms of time, cost, resources and accuracy. Also being widely used gives it a 1st mover advantage in a way especially when understanding complementary products, media to use to communicate, events etc.

Why is it Important?Why is it Important?� Increased life expectancy� Requirements for completely new product & their

development� A very affluent segment of the population with varying

amounts of disposable income� Large proportion of population in some countries� Large proportion of population in some countries� Possible untapped opportunity in a crowded market


When we say ‘segmenting older ppl’ we are already talking about a segment and so this is a sub-segment. Traditionally these were considered a very homogenous group and generally ignored Also the lectures will flow into targeting & positioning which will be New products for elders- examples? New financial products, differently designed consumer goods, white goods, apartments- Paranjape builders has built ‘Athashri’.

Why is it Tougher?Why is it Tougher?� Less Tribal and more individualistic� More and varied experiences leading to very different

preferences & behaviours� Marketers are most often below 50 years- so difficulty

in relating� Very varied amount of disposable incomes� Very varied amount of disposable incomes� Significant proportion want to ‘experience’ new

products, lifestyles & brands� Most importantly- they do NOT want to feel old


Due to their experiences they have very different values, lifestyles, priorities Within this segment, age or other conventional demographic criteria don’t work, neither do geographic ones Possibly the 1st step is to do research to understand if there are any other ways of segmentation? NOT going to answer this question but will give some inputs A chain in the US made special household durables for ‘old ppl’ –flopped badly

Tips for Marketing to the Older MarketTips for Marketing to the Older Market

1. Many older people seek experiences, and do not want to be just spectators. They want to do, not just see.

2. When they want an experience, they want a top notch experience. And, more than most, they will pay for it.

3 Appeal to their core values and motivations. Don’t underestimate those, or stereotype them because of their age.

4. Don’t forget sensory experiences, and the importance of entertainment or fun. It should not be too hard work

5. They like products and services that save time.6. They also like value for money. They do research before they buy.7. Marketing should be honest and authentic; avoid hyperbole.8. Word of mouth referrals are important. Old fashioned social networking9. They want a rational as well as an emotional benefit10. Don’t use chronological age to predict who they are and what they’ll do. Don’t

assume they are all the same, don’t stereotype

Source: http://www.wisebranding.co.uk/blog/tag/marketing-to-the-over-50s/


Explain each point SPEND TIME HERE

Additional ReadingsAdditional Readings� http://www.wisebranding.co.uk/blog/tag/marketing-to-

the-over-50s/� http://www.emarketing.net.cn/upload/file/2008/05/08/00

1210177863586.pdf


SWOTSWOTDetails & Examples


Want to take a step back before we talk more about segmentation. Where does it start with an analysis of the situation. So lets talk a little bit about SWOT and a case study about it

Why SWOT?Why SWOT?� It gives structure to the data collected from:◦ Market research◦ Customer feedback◦ External sources

� It helps to highlight key problem areas, strengths opportunities & issues across the organizationopportunities & issues across the organization

� It is easy enough in its structure to be understood at multiple levels- hence can be carried out at product, SBU & company level


Data is often overwhelming in large companies- you will realize this This will give a starting point and has the flexibility to be done at any level of detail Read & Explain

Skoda UK CaseSkoda UK Case� Background:◦ Started as an Arms manufacturer in

1859 in Czechoslovakia◦ Acquired Laurin-Klement in 1924- beginning of Skoda

Auto◦ Was well-regarded right upto 1970s despite having

outdated technologies and communist policiesoutdated technologies and communist policies◦ Its reputation then started to decline upto a point where

it was called the ‘laughing stock of the automotive world’◦ Volkswagen acquired a stake in 1991 and worked on

improving its image◦ Became completely owned by VW

in 2000


Chose this case because we know this brand; also products are familiar. Market is not that different. Auto industry is an important industry particularly from pov of marketing strategy. The idea is to understand the ROOT of marketing strategy- research & analysis Background- Old company, suffered due to perceptions- communist, iron curtain and old technology. Strong competition PICTURE: Voiturette A- first car made by them. Old Model Superb

What was done?What was done?� An independent research was carried out by a known

market research agency� Surveys & polls such as ‘Top Gear’, J.D. Power were also

analysed� Company personnel at all levels were consulted about

customers’ opinionscustomers’ opinions


The start of a good SWOT has to be thorough research. It cannot be based on available information only as that would lead to Hubris/ Complacency, tunnel vision Unbiased view is required to start an ‘Honest SWOT’

SWOTSWOTINTERNAL

Strengths Weaknesses

•100 + year old history / experience of car manufacturing•Established brands such as Superb, Rapid, Octavia•Focus on human experience rather than cars-strategy to build cars that

•Only has 1.7% of the market share in UK market•East European origin of the brand leading to misconceptions about quality, image and technology•Image still ‘neutral & weak’ according than cars-strategy to build cars that

owners enjoy driving•Image improvement due to efforts & association with Volkswagen AG•Rated #1 car maker by Top Gear•Octavia rated best car by Auto Express•98% of drivers would recommend the car to friends- So very high satisfaction levels among customers

•Image still ‘neutral & weak’ according to brand health check


Read out – talk about the points

SWOTSWOTEXTERNAL

Opportunities Threats

•No of Competitors focusing on product only-

•BMW- Ultimate Driving Machine•Audi- Vorsprung durch Technik

•Gaps in product lines of competitors•Likability of Skoda cars higher than

•50 car makers having 200 models & 2000 derivatives (variants)•Cheaper cars & car makers coming into the market•EU legal & environmental constraints- lower emissions, tougher •Likability of Skoda cars higher than

Ford, Renault•New segments being created due to changing lifestyles

constraints- lower emissions, tougher safety regulations etc.


Read out- explain why Skoda approach is different- unique or better? Likability is owners satisfaction & happiness with the brand

What did they do?What did they do?


� They focused on ‘happiness’� Expanded variants to fill gaps� Leveraged Volkswagen’s economies of scale by

using common platforms for cars across the group- A1 platform is used across 20+ cars

Nice Tag line- clearly giving a sense of long term ‘satisfaction’ BTW the car is one of the ‘new segment’ cars- small car designed like an estate

INTERNATIONAL INTERNATIONAL SEGMENTATIONSEGMENTATIONSEGMENTATIONSEGMENTATION


End with this Q if possible else till sequential seg’tion

Segmenting across international Segmenting across international boundariesboundaries� What is the need?� What would be the challenges?� What would change in the 4 P’s?:◦ Price◦ Packaging◦ Promotion◦ Promotion◦ Place

� Examples you know or use?


Essentially used when companies are looking at regional scale of production- high level of economies of scale. Typically these products will be targeted at urban areas- since some preferences are similar- healthy b’fast- Kellogg’s Price- convert + duties, taxes etc Packaging- language, regulations, data Promotion- Might be very different or exactly the same- WHY? Place- how would the distribution strategy work? We are talking about international products. Think about how Indian products would be sold in Singapore, Malaysia, US etc.?

What does it mean?What does it mean?International Segmentation:The process of identifying countries and/or consumers that are similar with regard to key traits, such as product-related needs and wants (across countries), that would respond well to a (similar) product and related marketing mix.mix.

�Who all would have use for it?


Apart from MNCs in consumer & B2B products even niche products, luxury goods are a classic case. Talk about luxury goods- What are they? Typically a product which sets the standard in product, service, style etc. Where brand value is often comparable or even more than asset. Def: An item that is not necessary for living, but is deemed as highly-desired within a culture or society and possibly for which a better/ more expensive product does not exist�

SEQUENTIAL SEQUENTIAL SEGMENTATIONSEGMENTATIONSEGMENTATIONSEGMENTATION


Sequential SegmentationSequential SegmentationThe division of a heterogeneous market into relatively homogeneous groups on one basis (for example, geographically), followed by further segmentation on some other basis (for example, end-user type)�Reasons for sequential segmentation:◦ New product introduction◦ New product introduction◦ Limited resources◦ Secondary markets◦ Test marketing◦ Niche products


So a product could be targeted at the upper middle middle class of Bangalore who are serious fitness enthusiasts- this could be a protein shake Hand-made overcoats could be targeted at North Indian cities’ affluent men Sometimes this segmentation can even happen in 3 stages- geographic, age, behaviours- Mumbai- 18 to 35= customers of high end laptops

Example: Example: AluminiumAluminium ManufacturerManufacturer� Which Market? Automobile/ Residential/ Beverage

◦ Residential: Semi-finished material,/ building components/ Aluminium mobile homes

� Building Components: Large/ Medium/ Individual Customers

� Large Customers-Orientation? Price/ Service/ Quality

� Quality

Service Oriented Customers of Aluminum Building Components in the Residential Market


Market- even others like aviation exist Talk about each level of segmentation LAST END HERE

UNITED AIRLINES UNITED AIRLINES CASELETCASELET

How would you segment? What are the challenges?

CASELETCASELET


QuestionQuestion-- United AirlinesUnited AirlinesIntroduction:

Today we live in a global community as global citizens where we have become increasingly conscious about sharing the planet with people from other cultures and backgrounds. In this global community where so many technologies are shared, distances and time barriers have shrunk. Not only can we use information technologies to e-mail, phone or fax friends, family and colleagues in other parts of the world, we can also use reliable and regular travel links to visit them, covering vast distances in a matter of hours. Whereas in the past travelling by air was, for many people, an experience more often than not associated with an annual family holiday, today air travel has become a way of life both for business and leisure. One frequently quoted estimate is that demand for air travel will double in the next 20 years. As a result more and more people do not just need regular air travel, but also the type of travel that meets their particular needs best. For example, unlike the manufacture of tangible goods such as shampoo or bread that have clear uses, providing travel opportunities is more sophisticated as it involves providing customer service to match the expectations of travel users. About United Airlines:


About United Airlines:

United Airlines was formed in 1927 from four airlines - Boeing Airplane Company, National Air Transport, Varney and Pacific Air Transport. From its roots as a USA domestic carrier, United Airlines expanded into international routes to become the world's second largest air carrier. With hubs in Chicago, Denver, Los Angeles, San Francisco, Washington D.C. and key international gateways in Tokyo, London, Frankfurt, Miami and Toronto, United flies to 117 destinations in 26 countries. These schedules are obviously subject to change. United employs more than 80,000 people worldwide and carries more than 210,000 passengers every day. Its customers have access to more than 729 destinations around the world through Star Alliance, the leading global airline network.

Question:

Customers in this industry look for various things such as convenient routes, correct timings, better service and connectivity. How can United Airlines segment its market so as to better position its services and reach out to the right customers with its marketing communications?

Need for Segmenting?Need for Segmenting?� Given its global reach & size United Airlines Customers

want very different things� United Airlines can identify market opportunities and

meet its marketing objectives. � Segmentation gives an airline a better understanding of

its customers, the services they require, where and its customers, the services they require, where and when they want those services and how they would prefer to pay for them.


Advantages of SegmentationAdvantages of Segmentation� United Airlines segments its market so that it can:◦ identify consumer needs and the proportion of customers who

have those needs◦ develop products and prices to meet these needs◦ target communications at customers within each segment◦ allocate funds to support and develop each market opportunity.◦ allocate funds to support and develop each market opportunity.Market segmentation therefore enables United Airlines to maximise the efficiency of its marketing efforts by moving the company to use a different strategy for each market segment.


How was it Done?How was it Done?� United Airlines uses a form of psychographic segmentation to divide up the market for its services. This involves identifying the social class, lifestyles, opinions, interests, behaviour and attitudes of customers.

� Modern communication systems play a major part in this information-gathering exercise. With the help of questionnaires, United Airlines classifies its customers by their motivations. questionnaires, United Airlines classifies its customers by their motivations.

� For United Airlines, successful segmentation enables targeting to take place. Targeting provides the focus for the activities of the business.

� It enables promotions and services to be aimed only at those who are most likely to respond positively to them. Passengers are communicated with through email which is becoming a focus for closely-targeted marketing.


For example, some customers choose United Airlines because of price, while others choose the airline because of schedules, frequent flyer programmes or other forms of service.

Focus of SegmentationFocus of Segmentation� The United Airlines business model can be compared to

the classic 80:20 rule in Pareto's Analysis. � Based on experience of the airline industry, the model

assumes that, for airlines offering a high level of service, 80%of profit comes from 20% of customers.

� The profit-generating customers are the ones who are � The profit-generating customers are the ones who are prepared to pay a premium price for a premium service. They are the ones that the airline most needs to attract.

� This is what the segmentation needs to identify and target


The Psychographic SegmentsThe Psychographic Segments1. Global executives2. Schedule optimizers: 3. Corporate troopers:4. Mile accumulators:5. Reluctant travellers:6. Tour takers:7. Quality vacationers:8. Travel seekers:9. Frugal flyers:

Abhishek Bhide- Mktg Strategy- MET-eMBA

Global executives: face frequent business travel and enjoy it because of the high level of service. Schedule optimizers: must reach their destination by a certain time and select their flights accordingly. Corporate troopers: use an airline and a class of travel that has been chosen for them by their company. Mile accumulators: go out of their way to take flights that will build up their air miles entitlement. Reluctant travellers: do not enjoy travel and look for services that will make the experience bearable e.g. special privileges and frequent flyer programmes. Tour takers: want everything arranged for them. Quality vacationers: treat the travel as part of the holiday experience and so fly with carriers that provide superior services. Travel seekers: love to travel and seek out new experiences. They want travel to be comfortable. Frugal flyers: seek out the lowest cost carriers, but still expect their flight experience to be a good one.

References:References:� Marketing Management – Kotler & Keller� Wikipedia� Tutor2u.net� ISB Study materials� http://www.citeman.com/1417-sequential-segmentation.html


BUSINESS TO BUSINESS BUSINESS TO BUSINESS SEGMENTATIONSEGMENTATION

Lecture 4

SEGMENTATIONSEGMENTATION


Most of my experience is in this field- large ticket, complex, consultative selling

What is Different?What is Different?

1. B2B markets have a more complex decision-making unit

2. B2B buyers are more ‘rational’3. B2B products are often more complex4. B2B target audiences are smaller than 4. B2B target audiences are smaller than

consumer target audiences


Long Explanation: 1. The purchase of a piece of plant equipment may involve technical experts, purchasing experts, board members, production managers and health and safety experts, each of these participants having their own set of (not always evident) priorities- which may not be same. Discuss. So what is the segment here? 2. The irrational, impulsive quality is ABSENT here. The decision making is governed by the rules & procedures of the organization. Agree? So possibly segmentation might be easier though different 3. Even complex consumer purchases such as cars and stereos tend to be chosen on the basis of fairly simple criteria. Conversely, even the simplest of b2b products might have to be integrated into a larger system, making the involvement of a qualified expert necessary. Whereas consumer products are usually standardized, b2b purchases are frequently tailored. Then can we segment? So divide into key accounts and others into segments 4. 100 to 200 customers compared to millions- so only 3 to 4 segments but data less

What is Different?What is Different?5. Personal relationships are more important in B2B

markets6. B2B buyers are longer-term buyers7. B2B markets drive innovation less than consumer

markets8. B2B markets have fewer behavioural and needs-based 8. B2B markets have fewer behavioural and needs-based

segments


5. Relationship building/ consultative selling- but what do we get in return? Talk about does loyalty pay for 5 mins 6. Repeat & long-term are more common in business-to-business markets, where capital machinery, components and continually used consumables are prevalent. In addition, the long-term products and services required by businesses are more likely to require service back-up from the supplier than is the case in consumer markets. A computer network, a new item of machinery, a photocopier or a fleet of vehicles usually require far more extensive aftersales service than a house or the single vehicle purchased by a consumer. 7. B2B companies that innovate usually do so as a response to an innovation that has happened further upstream. So impact on segmentation? 8. The small number of segments typical to b2b markets is in itself a key distinguishing factor of business-to-business markets. experience of over 2,500 business-to-business studies shows that B2B markets typically have far fewer behavioural or needs-based segments than is the case with consumer markets. Whereas it is not uncommon for an FMCG market to boast 10, 12 or more segments, the average business-to-business study typically produces 3 or 4.

Examples of Segments in B2BExamples of Segments in B2B� A price-focused segment,

which has a transactional outlook to doing business and does not seek any ‘extras’. Companies in this segment are often small, working to low margins and regard the product/service in question as of low strategic importance to their business.

� A quality and brand-focused segment,which wants the best possible product and is prepared to pay which wants the best possible product and is prepared to pay for it. Companies in this segment often work to high margins, are medium-sized or large, and regard the product/service as of high strategic importance.

Contd…Abhishek Bhide- Mktg Strategy- MET-eMBA

This is a very simplistic segmentation. Price- transactional approach- always tension; Usually not a strategic product- a commodity for that industry- a cog for example or a fan belt or cement- may not be a commodity to others Quality/Brand- now this is differentiated- this is what companies in 1st category are trying to achieve- this is the beginning of ‘a relationship’ with the customer

Examples of Segments in B2BExamples of Segments in B2B� A service-focused segment,

which has high requirements in terms of product quality and range, but also in terms of after sales, delivery, etc. These companies tend to work in time-critical industries and can be small, medium or large. They are usually purchasing relatively high volumes.A partnership-focused segment, � A partnership-focused segment, usually consisting of key accounts, which seeks trust and reliability and regards the supplier as a strategic partner. Such companies tend to be large, operate on relatively high margins, and regard the product or service in question as strategically important.


Service- this is a continuation- now u have a well-developed relationship. This is where product and servicing or customization after delivery is required. This is usually a key customer Partnership- usually involves top management- deals involving joint development, marketing. Eg: Microsoft deal with Jones lang lasalle

Types of Segmentation in B2BTypes of Segmentation in B2B

http://www.b2binternational.com/publications/white-papers/b2b-segmentation-research/


Spend time here Going from right to left its gets more difficult but accurate. We are following the logic of motivation? attitudes? Behaviour Convenient for us- simple demographics; very very common! Firmographics- including the 1st one its almost 90%+. This will look at segmenting by Company size or products made or markets targeted etc. Behaviour- very difficult- Companies wont tell you! Think about it in terms of execution- who will do this research? How will you find it? Will they tell you? Needs- The epitome- these are usually expressed only by ‘top management’ so how do we find these?

Advantages of this SegmentationAdvantages of this Segmentation� United Airlines segments its market so that it can:◦ identify consumer needs and the proportion of customers who

have those needs◦ develop products and prices to meet these needs◦ target communications at customers within each segment◦ allocate funds to support and develop each market opportunity.◦ allocate funds to support and develop each market opportunity.Market segmentation therefore enables United Airlines to maximise the efficiency of its marketing efforts by moving the company to use a different strategy for each market segment.


Hence concluded- increase in profitability and more routes

Problems in Execution?Problems in Execution?� Resources� Suitable segmentation basis� Periodicity of Segmentation� Suitable dissemination of Study� Communicating to the Sales team


Resources- how much to spend? Which agency? I was part of this- was a tough task- never happened Suitable- What variables to use? Is weight of ppl a variable for cars? But no of kids or size of family is Periodicity- Who makes sure that it keeps happening periodically? What’s the current gap? Dissemination- How to structure the results so that everyone gets it? Who decides? Communicating- Getting the share of mind of the sales team

TARGETINGTARGETING


The Big PictureThe Big Picture

Segmentation

ProductTargeting


Promotion

Place

Price

Positioning

Targeting & Target SegmentsTargeting & Target Segments� The selection of potential customers segments to

whom a business wishes to sell products or services.

� A target market/ segment is a group of customers � A target market/ segment is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards.[


Which Segments to Target? How?Which Segments to Target? How?

� Points for effective segments� How do they help us decide

targeting?Measurable

Substantial

Accessible


Accessible

Differentiable

Actionable

Targeting the right segmentsTargeting the right segments� Substantial- Target the biggest or smallest first?� Accessible- Most accessible & least costly to address� Differentiable- If the segment is easy to differentiate-

means it will be easier to address


Subs- why would one target smaller segment? Cos have supply constraints- very common in B2B or even consumer durables Access- Get off the ground fast before competitors realize Differentiate- A clearly different group is easy to target

Single Segment & Selective TargetingSingle Segment & Selective Targeting


Advantages of both approaches?

SpecializationSpecialization


Example:Example:� Three Companies/ Products which are Transportation

softwares� Products are comparable and priced competitively� Markets are segmented by:◦ Sector◦ Size of Computer systems◦ Size of Computer systems


Sequential TargetingSequential Targeting


Company A decides to target Airline segment; company B is targeting only large computer systems Can be considered as an example of sequential segmentation Company C is adopting a sequential targeting strategy- the path shown is one possible way- purely because there are no competitors

POSITIONING & POSITIONING & DIFFERENTIATIONDIFFERENTIATIONDIFFERENTIATIONDIFFERENTIATION


PositioningPositioning� Positioning is defined as the act of designing the

company’s offering and image to occupy a distinctive place in the target market’s mind◦ Re-positioning involves changing the identity of a product,

relative to the identity of competing products, in the collective minds of the target market.◦ De-positioning involves attempting to change the identity of

competing products, relative to the identity of your own competing products, relative to the identity of your own product, in the collective minds of the target market.

� Thus positioning will impact:◦ Product features◦ Packaging◦ Distribution◦ Availability◦ Pricing & discounting◦ Communications


What is Positioning?What is Positioning?1. Positioning is a final step in the Segmentation Targeting and Positioning

step

2. Positioning requires a holistic approach and is one of the most useful tools for marketers.

3. Positioning is almost completely about perception. How the customer perceives your product or brand is what positioning is all about. Thus the best mass marketers like to use marketing tactics which touch the whole market

4. Perceptual mapping is generally used to determine the Positioning of a 4. Perceptual mapping is generally used to determine the Positioning of a product in the target market.

5. Positioning can make or break a brand. A rightly perceived product / company gets lots of returns from the market as compared to a wrongly perceived company. Example – Airtel vs Reliance telecom

6. Communication is of ultimate importance in positioning. The right communication can go a long way in determining the perception of a product / brand.

7. Finally, Attributes – tangible or intangible (in case of services) are necessary to be involved in the product which increase the positioning of the product in the customers mind.


What is Positioning?What is Positioning?5. Positioning can make or break a brand. A rightly

perceived product / company gets lots of returns from the market as compared to a wrongly perceived company.

6. Communication is of ultimate importance in positioning. The right communication can go a long positioning. The right communication can go a long way in determining the perception of a product / brand.

7. Finally, Attributes – tangible or intangible (in case of services) are necessary to be involved in the product which increase the positioning of the product in the customers mind.


5. Example – Lifestyle v/s Marks & Spencer 6. No communication is even worse sometimes- consumers appreciate honesty and action- Nestle example- ‘Nan’ -90% + market share- baby product- glass bits allegation 7. Attributes- features –very specific communication to customers!

Note on Perceptual MappingNote on Perceptual Mapping� Perceptual Mapping is a diagrammatic technique

used by asset marketers that attempts to visually display the perceptions of customers or potential customers. Typically the position of a product, product line, brand, or company is displayed relative to their competition.displayed relative to their competition.

� The map can also have indicators of customer preferences

� The position can also be displayed as a circle or shape which is relative to its size in the market


Perceptual Map & OldsmobilePerceptual Map & Oldsmobile


Cars that are positioned close to each other are seen as similar on the relevant dimensions by the consumer. For example consumers see Buick, Chrysler, and Oldsmobile as similar. They are close competitors and form a competitive grouping. A company considering the introduction of a new model will look for an area on the map free from competitors. Some perceptual maps use different size circles to indicate the sales volume or market share of the various competing products. Oldsmobile: In Oldsmobile's last years GM brought out "luxury" models to compete with Japanese competitors, but then economy models to grab entry-level buyers. It developed high-performance engines and new steering and braking systems to appeal to younger buyers who preferred foreign brands and then, when its older core customers complained about the tight steering and premium fuel, GM detuned the engines, which consequently confused the younger buyers.

Positioning StrategiesPositioning StrategiesPositioning Strategies can be based on:1. Product characteristics or benefits2. Competitive Pricing3. Time or occasion of use4. Usage Frequency5. New Class or category6. Competitive Positioning


Product characteristics or benefitsProduct characteristics or benefits� This strategy basically focuses upon the characteristics

of the product or customer benefits.� A product may also be positioned along two or more

product characteristics at the same time.

Examples?Examples?


Product characteristics or benefitsProduct characteristics or benefits


Talk about each product- 7up- flavour- doing it in India Salt- very specific & great recall value Pepsi- Also talking about ‘value for money’ – competitive positioning- think about PLC

Competitive PricingCompetitive Pricing� Products offered at the best price in the market� OR with some additional benefits or services at the

same price� The focus remains the pricing of the product

Examples?Examples?


Competitive PricingCompetitive Pricing


A lot of these companies would be services or trading companies. Manufacturers of commodities also come in this category

Time or occasion of useTime or occasion of use� The time or occasion when you are most likely to

consume this product is communicated� Also used to expand the occasions when the product is

CURRENTLY being used

Example?Example?


Time or occasion of useTime or occasion of use


When do I use it? Emphasize my position for that purpose Then add other occasions

Usage FrequencyUsage Frequency� Strategy to focus on usage amount, frequency and time

and increase it through positioning

Examples?


Usage FrequencyUsage Frequency


Ocean spray case- associated with thanksgiving-cranberries- started by growers cooperative- now a brand with huge presence Hit- ghar pe rakho, kone kone me maro etc.

New Class or categoryNew Class or category� Strategy to position your product as a completely new

category or type in established markets thereby changing the dynamics of the market possibly attracting market share from across segments

Examples?Examples?


New Class or categoryNew Class or category


Wii- will do the case study in product strategy Innova- new category- even name indicates it Sam Adams- beer manufacturer- why launch this?

Competitive PositioningCompetitive Positioning� Where most or all of the attributes of the product are

positioned in relation to one or more major products/ brands in the market

� The features highlighted are meant to provide a competitive advantage

Examples?


Competitive PositioningCompetitive Positioning


Nirma- was priced at Rs. 3.50 per kg, at a time when HLL's Surf was priced at Rs 15. Avis famous for this- very risky! But both are huge today

ReferencesReferences� http://www.marketing91.com/positioning-strategies/� www.wikepedia.org
