THE BIG PICTURE: Marketing Management. Source of Volume Segmentation Case Discussion. Nilüfer Aydınoğlu Aug 20, 2013

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1 THE BIG PICTURE: Marketing Management Source of Volume Segmentation Case Discussion Nilüfer Aydınoğlu Aug 20, 2013

2 THE BIG PICTURE execute product STP service business objective entity goal competence marketing objective retention acquisition source of volume segment target position price place evaluate LOYALTY Head Heart Hand promotion

3 Relationship between Business Objective & Marketing Objective Core Competence Business Objective (Rev. vs. Profit) Time Frame (ST vs. LT) Acquisition New product development, marketing Revenues, market share Long-term Retention Customer service, marketing research Profit Short-term

4 THE BIG PICTURE: Source of Volume execute product STP service business objective entity goal competence marketing objective retention acquisition source of volume steal share / stimulate demand segment target position price place evaluate LOYALTY Head Heart Hand promotion

5 Source of Volume = Competitive Focus Exactly where is my business coming from? a key competitor / segment category growth What is the best way to influence beliefs / behaviors? competitive comparison emphasis on category benefit 1 st Step: Category / segment definition key benefits sought by consumers core business & core competence key competitors -will drive choice of source of volume

6 Stimulate Primary Demand Not driven only by exogenous factors (i.e., it s not entirely outside your control) Emphasize category benefit Brand name not as important Grow the category and then realize your fair share growth must be linked to core competence otherwise, you are a market research firm for competition Purview of the category leader steal share not usually an option increases accrue according to current share positions availability of resources

7 Stimulate Primary Demand Pro: engenders leadership strategies important for growing industries less likely to draw competitive response doesn t enhance competitor credibility / awareness Con: expensive & most difficult to measure risky (forecasting uncertainty) natural gains to competitors How to stimulate primary demand? new users new volume (increased usage, new usage situations) new value (higher price paid)

8 Jaguar X-Type Stimulate Primary Demand New Users

9 Stimulate Primary Demand New Volume (new uses, increased usage)

10 Arcelik Refrigerators Stimulate Primary Demand New Value

11 Steal Share Earn share from key competitor / segment Realistic assessment of relative strengths Must have clear point-of-reference from whom? dominate on what variable?

12 Steal Share Pro: leverages existing awareness highly efficient / quick response lower short-term risk (tighter forecasting, easier to measure) Con: consider competitive / consumer response: competitor: remove differentiation price / feature wars consumer: negative affect / counter-argumentation no long-term place to live

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15 Dr. Aysegul Ozsomer

16 Dr. Aysegul Ozsomer

17 Dr. Aysegul Ozsomer

18 Key Activity marketing objective source of volume steal share stimulate demand acquisition retention attract new category users attract new brand users increase consumption / value among current users increase consumption occasions among multibrand users

19 THE BIG PICTURE: STP execute STP product service business objective entity goal competence marketing objective retention acquisition LOYALTY Head Heart Hand source of volume steal share / stimulate demand segment target position main variable dynamic variable TA description 5-box positioning statement price place promotion evaluate

20 STP Overview What do you want to be & to whom? MARKET SEGMENTATION Divide a market into smaller groups with distinct needs, characteristics, or behaviors. Might require separate products or marketing mixes. MARKET TARGETING Evaluate attractiveness of each segment. Select one or more target segments to enter. PRODUCT POSITIONING Arrange for the product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

21 STP Overview 1. brainstorm segmentation variables 3. plot the market 5. select position 2. evaluate/ select variables 4. select target 6. articulate position

22 Segmentation What: process of identifying a group of consumers sharing at least one characteristic that will likely increase their responsiveness to our marketing message Why: increase efficiency of marketing efforts disciplined approach to uncovering opportunity/latent demand Mass Marketing (Economies of Scale) Customization (Understanding customer needs, tailoring marketing efforts)

23 Balancing Efficiency and Effectiveness of Marketing Buyers differ in one or more ways, e.g. needs, and: People prefer things that exactly meet their needs, as opposed to things that function OK but do not precisely meet their needs. People like to be talked to in ways that reflect full understanding of their needs, rather than in more general terms. People will often pay more for things that exactly meet their needs, and/or as a result of being talked to in specific ways.

24 Example: Segmenting Pregnancy Test Buyers

25 STP Overview 1. brainstorm segmentation variables 3. plot the market 5. select position 2. evaluate/ select variables 4. select target 6. articulate position

26 1. Brainstorm Segmentation Variables Types Demographic (what people are) Age, family life cycle, gender, income, education, religion, social class, etc. Behavioral (what people do) Purchase freq., search, usage occasions, user status, usage rate, etc. Attitudinal (what people believe) Preferences, opinions, beliefs, needs, intentions, satisfaction, willingness to recommend, etc. Aspirational (what people want/would like) Aspirations, fantasy, dreams, life goals, life values Collection Easy Easy/medium Difficult Difficult Competitive advantage Value / use Low Market sizing Seg. Descriptors High if proprietary & linked to perceptual data Highly predictive of sales Strategic if linked to attitudes Seg. Descriptors May be high if linked to core competence Strategic & proprietary Predictive if linked behaviors Seg. Bases May be high if linked to core competence / brand personality Strategic & proprietary Seg. Bases

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28 1. Brainstorm Segmentation Variables Favored Brands Brands on sale Ipana Ultra Brite Colgate Superstar Benefit Segments Economy (low price) Medicinal (decay prevention) Cosmetic (bright teeth) Demographic Behavioral Psychographic Men Heavy users High autonomy Value oriented Large families Teens, young adults Heavy users Multiple users Smokers Hypochondriac Conservative High sociability Active Taste Children Spearmint lovers High selfinvolvement Hedonistic

29 EXAMPLE: Harley Davidson Segments Tour Gliders I love to ride long distances My bike is made for comfort Hard Core Sometimes I feel like an outlaw Some people would call me a dirty biker Live to Ride My bike is everything to me Motorcycles are a total lifestyle to me Hog Heaven When I m on my bike, people seem to be admiring me Women admire my motorcycle

30 EXAMPLE: Beymen Segments Potential Customers Anatolian Tigers Plaza People Gossip Girls Mix & Matchers Avangard Fashion Followers

31 Requirements for Effective Segmentation Measurable Size, purchasing power, profiles of segments can be measured. Accessible Segments must be effectively reached and served. Substantial Segments must be large or profitable enough to serve. Differentiable Segments must respond differently to different marketing mix and actions. Actionable Firm must be able to attract and serve segments.

32 2. Select Segmentation Variables Main variable cost of entry category variable primary benefit consumers seek will become the expected variable Dynamic variable potential variable category leader: benefit / lifestyle secondary brand: steal share feature

33 2. Select Segmentation Variables

34 2. Select Segmentation Variables marketing objective source of volume steal share stimulate demand What is your core competence? Defensible positioning What is your source of volume? Consumer relevance acquisition retention emphasize category variable emphasize dynamic variable emphasize category variable / new use emphasize dynamic variable

35 KitchenComplete What needs does it meet? What value does it create? For whom? How should Robert set the price? Can he pull it off financially? Any other potential customer group? What should he do?

36 BP Case Memo Guidelines Briefly introduce brand/issue Identify unit of analysis 3 C s Analysis (5C s if relevant for category) Customers: Needs, benefits sought, market size/growth, decision making process/roles, retail preferences, frequency / quantity of purchase, trends, Company: Product, image, competences, resources, technology, experience, culture, goals, Competitors: Actual-potential, direct-indirect Products, position, market shares, strengths, weaknesses,

37 BP Case Memo Guidelines Data Collection Suggestions Company sources: products, stores / outlets, communication efforts, press releases, etc. Secondary sources: competitor websites, consumer forums, industry reports, consumer reports, financial market information, etc. Primary data collection (?): observation, in-depth interviews (experts, consumers), focus groups, surveys

38 Next Time Targeting Module 6 Positioning Module 7 Product / Branding Module 8 BP Case Memo on 3C Analysis