Market Segmentation Seminar

Transcription

1 Market Segmentation Seminar A Critical Element of a Marketing Framework To Successful Commercialization Part of RIC Centre Volunteer Advisor Program Prepared By

2 Facilitator Background RIC Volunteer Advisor Principal at K+S and Associates Specialized in Strategy Development, Project Execution and Change Management Sales and marketing career background in biotechnology sector Specialized in new products commercialization 2

3 Objectives Of Market Segmentation Seminar Increase The Success of Commercialization Improve Alignment and Strategic Performance 1. Understand how to generate deep customer insights 2. Position yourself to make strategic choices and decide on where to play and how to win 3. Know your business 4. Grow team confidence, alignment and coordination around strategic decision making 3

4 Why Market Segmentation? It is a critical element of successful commercialization It positions an organization with a commercial advantage 1. Way of breaking down your total potential market into small homogenous components (market segments) 2. Allows marketer to find commonalties across the market segments 3. Reduce the risk in deciding where, when, how and to whom a product or service will be marketed 4. Target the right customer 5. Results in smart use of resources by directing targeted strategies 4

5 Table Of Contents Discussion Topics Page 1. Background & Context Market Segmentation Overview Example A Stepwise Approach

6 Context MARKET SEGMENTATION

7 The Overall Strategy Should Answer Five Essential Questions* Where will we compete? Our geographic, product categories, consumer segments What is our winning aspiration? Where will we play? How will we win? Our value proposition Our competitive advantage Targeted Customer Strategies Answers and decisions are achieved through a marketing framework 4 5 What mgt. systems are required? What capabilities must be in place? * Adapted from Rotman Magazine Winter Issue

8 The Marketing Framework Structures A Process Market Assessment Customer And Product Analysis Analysis of Forecasting Drivers Competitive landscape Understand Strategic Choices Market Insights Choose Where To Play Strategy Development Decide How To Win Execute Plan Of Action These analyses from the market assessment come together to generate key market insights that will inform decision making on strategy 8

9 Customer and Product Analysis Is A Crucial Element Of The Market Assessment It is broken down into five analytical assessments to gain a deep understanding of the market Buying Process Product Attribute Analysis Market Segmentation Customer Portrait Brand Benefit Ladder What is the customer journey? What are their behaviors that lead to their choice of brand? What are the desired behaviors? What are the brand attributes preferred by the customer? What are the distinct customer segments with unique characteristics and behaviors? What motivates the customer segments to behave the way they do? What are the brand benefits offered to the customer and how does this compare to the competitive offering? Market Segmentation Is A Critical Element Of The Five Assessments and Overall Commercialization 9

10 Discussion Topics Page 1. Background & Context Market Segmentation Overview Example A Stepwise Approach

11 What? What Is Market Segmentation? Market Segmentation is the process of identifying unique segments of an addressable market. It can be driven by qualitative or quantitative data requirements. Market Segmentation can be structured in various ways to identify distinct segments of customers that make up your total addressable market. Total Addressable Market Served Addressable Market Total Addressable Market Target Market Captures All Potential Markets/Customers Captures segments that aligns with your value proposition and capabilities Go-to-market Aligns with your direct path to success 11

12 Why? Why Do Market Segmentation? Positions you to examine the different opportunities across the segments Allows you to characterize the behaviours of your customers Tool to quantify the size of the segments Illustrates revenue projections across the segments and market share Informs On Key Activities: Informs R&D Informs positioning and messaging Informs pre-launch and launch activities Informs On Key Strategic Decisions: Helps to prioritize market segments ( Where to Play ) Positions you to choose specific, targeted strategies Decide on sequence of market entry ( How to Win ) 12

13 Benefits? What Are The Benefits? Faster Uptake Higher Market Share Higher Customer Retention More Efficient Resource Allocation Enhanced Profits 13

14 How? How Do You Do Market Segmentation? Market Segmentation is often demonstrated as an illustration or framework to identify distinct segments of customers with unique requirements, characteristics and behaviours The totality of the distinct segments make up the total addressable market It is accomplished in a stepwise approach 14

15 Discussion Topics Page 1. Background & Context Market Segmentation Overview Example A Stepwise Approach

16 Example Of Stepwise Approach New Device Competition X Competition Y Future Competitors Background Information A company developed a new electronic device that monitors engine performance and generates e-reports 2x faster than the competition Less reporting errors vs. competition It can be used on engines across different industries It is compatible with engines from different manufactures It is a pocket size device that can be connected to any computer or smart phone It can be used in any location Slower monitoring time Some reporting errors Manufacturer specific (sold to manufacturer dealership service centres) Bulky system on wheels that takes up space Slower monitoring time Some reporting errors Applicable across all manufactures (sold to franchise and private repair service centres) Bulky system on wheels that takes up space 3 years away 16

17 Step One Identify Market Segment Variables Identify Market Segment Variables Plot the market segment variables on a 2x2 grid Can be based on multiple dimensions Choose variables that are actionable and meaningful Criteria for choosing variables? Distinct segments Quantitatively unique Qualitatively unique 17

18 Example A (High Level) Example of segmentation model that examines different industries and the different types of consumers Industry Categories Automotive Industry Marine Industry Industrial Equipment Transportation Industry Manufacturer Service Centres Consumers Franchise Repair shops Private Repair Ownership Vehicle Owner 18

19 Example B (Lower Level) Example of segmentation model that examines one industry and buyers/influencers Automotive Consumer Manufacturer Service Centres Franchise Repair Shops Private Repair Ownership Vehicle Owner Buyers and Buying Influencers Owner General Manager Procurement / Purchasing Manager Foreman / Supervisor Service Mechanic Owner 19

20 Step Two Identify Distinct Market Segments Use The Variables To Identify and Define Unique Market Segments Group segments where there are similarities or keep them separate Market Segment A Market Segment B Market Segment C Market Segment E Market Segment D Market Segment F Clearly Describe Each Segment Characterize the behaviours of your customers in those segments Quantify the size of the segments Define competitive environment within segments Validate and Refine Through: Qualitative market research Quantitative market research 20

21 Example A Illustrates the breakdown of distinct market segments Illustrates grouping of markets that show similar characteristics Identifies who makes the purchase Identifies who influences the buyers decisions Automotive Consumer Categories Manufacturer Service Centres Franchise Repair Shops Private Repair Ownership Vehicle Owner Owner General Manager -Motivated to improve efficiency -influences procurement manager Buyers and Buying Influencers Procurement / Purchasing Manager Foreman / Supervisor Service Mechanic Owner -The Procurement Manager is buyer with approval From GM and foreman/supervisor - Influences procurement Mgr. -Accountable to improve efficiency -Not The buyer -Motivated to achieve efficiency -Influences the foreman Mechanic is buyer -motivated to achieve shop efficiency -Owner is buyer 21 21

22 Example B Shows Size Of Market Segment Examines competitor environment Characterizes market segment complexity Defines overall market segment attractiveness Automotive Consumer Categories Manufacturer Service Centres Franchise Repair Shops Private Repair Ownership Vehicle Owner Owner Buyers and Buying Influencers General Manager Procurement / Purchasing Manager Foreman / Supervisor Service Mechanic Owner Perform 70% of vehicle repairs Competition X entrenched in 100% of manufacturer service centres Competitor Y entrenched in 100% of franchise repair shops Requires more complex selling model...multiple decision makers influence purchasing Highly Attractive Market Perform 25% of vehicle repairs Competition Y 60% penetration Less complex selling model Perform 5% of vehicle repairs Attractive Market Less Attractive Market No competition Retail selling 22strategy

23 Step 3 Prioritize Launch Strategy Prioritize and Sequence Market Entry Prioritize most attractive markets Priority 1a Launch Take Share Priority 1b Launch Take Share Priority 2 Post Launch Take Share Priority 4 Priority 3 Develop Market Priority 5 Sequence market entry Project market penetration and or market share (if applicable) Calculate the expected forecast and revenue projections (if applicable) 23

24 Example Automotive Consumer Categories Manufacturer Service Centres Franchise Repair Shops Private Repair Ownership Vehicle Owner Buyers and Buying Influencers Owner General Manager Procurement / Purchasing Manager Foreman / Supervisor Service Mechanic Owner Launch Priority #1 Take Share Strategy Year 1 Sales $X Year 1 Market Share X% Launch in 1 st year Launch Priority #2 Take Share & Develop Market Year 1 Sales $X Year 1 Share X% Launch in 2 nd year Find Partner Launch Priority #3 Costly selling 24 model for 5%

25 Three Important Reminders Ensure market segmentation variables are actionable and meaningful Ensure that the market segments are uniquely characterized to inform decision making Ensure the segments make up the total addressable market as you know it 25

26 Conclusions Market Segmentation is a straight forward exercise It is a critical element of a marketing framework to successful commercialization It is a fundamental element of customer analysis, generating insights and informing strategic decisions The benefits of market segmentation cannot be ignored 26

27 Thank You 27