Chapter 6 Market Targeting and Strategic Positioning Market Targeting Strategy Targeting in Different Market Environments Positioning Strategy Developing the Positioning Strategy Determining Positioning Effectiveness 1 MARKET TARGETING STRATEGY The Marketing Targeting Decision Identifies the People or Organizations in a Product-Market Toward Which a firm Directs Its Positioning Strategy Guided by an understanding of: The product-market Its buyers Firm s capabilities and resources Competition 2 1
Market Targeting and Strategic Positioning Core dimensions of market-driven strategy: deciding which buyer s to target and how to position the firm s products Effective targeting and positioning strategies are essential in gaining and sustaining superior performance 3 Positioning in Perspective Positioning is a central part of business strategy Positioning analysis starts with an understanding of the value proposition for the target segment Value-driven positioning is the objective Positioning seeks to differentiate the organization s offer from the competition Positioning seeks to create a unique perception in buyers minds of the target market segment Positioning is the unifying dimension of marketdriven strategy 4 2
SEGMENTS VALUE OPPORTUNITES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSTIONING FOR EACH 5 TARGET Design and implement a positioning strategy for each targeted segment Identify segments within the product-market TARGETING AND POSTIONING Decide which segment(s) to target 6 3
Market Targeting Alternatives Segments Clearly Defined Selective Targeting Target Selected Niche(s) Product Specialization Target Multiple Segments Product Variety Extensive Targeting Differentiated But Segments Not Clearly Defined 7 Factors Influencing Targeting Decisions Stage of product market maturity Extent of diversity in preferences Industry structure Capabilities and resources Opportunities to gain competitive advantage 8 4
TARGETING IN DIFFERENT MARKET ENVIRONMENTS Emerging Growing Mature Declining Global 9 Buyer Diversity Emerging Market Segmentation limited due to similarity of buyers preferences Industry Structure Typically small new organizations Limited access to resources Capabilities and Resources Unique benefit (differentiation) strategy rather than low-cost First-mover advantage Targeting Strategy Single target or a few broad segments 10 5
INNOVATION FEATURE An Emerging Market for Satellite Radio Services SATELLITE RADIO POWERS UP Satellite radio is catching on., with some 700,000 subscribers today and forecasts for 1.5 million by year end. WHAT IS SATELLITE RADIO? These systems bean CD-quality signals from space to special radios, most of which are installed in cars. Customers can also listen at home or on the go. WHERE IS IT AVAILABLE? Two carriers offer nationwide coverage. XM, based in Washington, D.C., is $19.99 a month; Sirius, based in New York, is $12.95 WHAT DO YOU GET? The services offer about 100 channels. Sirius is commercial-free, while XM broadcasts a limited number of ads. Programs range from music to news to comedy. WHO IS BACKING SATELLITE RADIO? Carmakers, who are eager for a stake in a new, fast-growing business. GM funded XM, and Daimler-Chrysler is backing Sirius. Others are picking one of the two technologies, which are not currently compatible. 11 INNOVATION FEATURE An Emerging Market for Satellite Radio Services DO MOST CARS HAVE SATELLITE RADIO? The systems are available on many new models for about $300. Within two years, satellite radio is expected to be available on many new cars. WHAT ABOUT HOME AND PORTABLE SYSTEMS? You can buy a palm-size receiver from Sirius or XM. They are available from retailers like Circuit City and Wal-Mart for about $200, including adapters. You can carry these, using them at home or in the car. For an additional $99, XM s can be used with a special portable boom box. XM has the lead position in the market but faces major financial challenges, and is spending $20 million in cash each month. With less than 1 million subscribers, XM needs 7.5 million and $1 billion in revenues to cover capital and interest costs. Source: This is the Dawning of the Age XM?, Business Week, July 7, 2003, 90-92. 12 6
Growth Market Buyer Diversity Segments should exist Industry Structure Numerous competitors Capabilities and Resources Survival requires aggressive actions by firms that seek large market positions Otherwise select one or a few market segments Targeting Strategy Three possible strategies 1. Extensive market coverage by firms with established businesses in related markets 2. Selective targeting by firms with diversified product portfolios 3. Very focused targeting strategies by small organizations serving one or a few market segments. 13 Strategies for Mature Markets Buyer Diversity Segmentation essential for competitive advantage Industry Structure Intense competition for market share Emphasis on cost and service, and pressures on profits Capabilities and Resources Management s objectives: cost reduction, selective targeting, product differentiation e tato Targeting Strategy Firms pursuing extensive targeting strategies may decide to exit from certain segments 14 7
Global Markets Global Reach and Standardization Identify market segments that span global markets and serve these needs with global positioning strategies Local Adaptation-Responsiveness Consider requirements of domestic buyers Buyers needs and preferences affected by social, political, cultural, economic, and language differences Industry Structure Restructuring, acquisitions, mergers, and strategic alliances altering industries and competition Targeting Strategy Targeting a single country, regional (multinational) targeting, or global targeting 15 POSITIONING STRATEGY Deciding the desired perception/ association of an organization/ brand by market target buyers and designing the marketing program to meet (or exceed) buyers value requirements. 16 8
Strategic Positioning Initiatives POSITIONING CONCEPT The desired positioning of the product (brand) by targeted buyers MARKET TARGET POSITIONING EFFECTIVENESS The extent to which positioning objectives are achieved for the market target POSITIONING STRATEGY The combination of marketing actions used to communicate the positioning concept to targeted buyers 17 How positioning works Objective Match the organization s distinctive capabilities with the customer value requirements in each market target (How do we want to be perceived by targeted buyers?) Desired result Gain a relevant, distinct, and enduring position that is considered important by the targeted buyers Actions by the organization Design and implement the positioning strategy (marketing program) for the market target. 18 9
The Perception or Association that Management Wants Buyers to Have Concerning the Brand Symbolic Functional POSITIONING CONCEPT Experiential 19 DEVELOPING THE POSITIONING STRATEGY The Positioning Strategy Places the Marketing Program (mix) Components into a Coordinated Set of Actions Designed to Deliver Superior Customer Value PROMOTION PRODUCT PRICE VALUE CHAIN 20 10
Positioning Issues 1. The positioning concept applies to a specific brand rather than all the competing brands that composea productclassification 2. The concept is used to guide positioning decisions over the life of the brand 3. Multiple concepts are likely to confuse buyers and may weaken the effectiveness of positioning actions 21 The positioning strategy indicates how (and why) the product mix, line, or brand is to be positioned for each market target. This strategy includes: The product strategy, indicating how the product(s) will be positioned against the competition in the product-market. The value chain (distribution) strategy to be used. The pricing strategy, including the role and positioning of price relative to competition. The advertising and sales promotion strategy and the objectives these promotion components are expected to achieve. The sales force strategy, direct marketing strategy, and the Internet strategy, indicating how they are used in the positioning strategy. 22 11
DETERMINING POSITIONING EFFECTIVENESS The marketing offer (product, distribution, price, and promotion) is both distinct and valued in the minds of the customers in the market target. 23 Several methods and metrics are available for analyzing positioning alternatives and determining positioning effectiveness Customer and Competitor Research Methods for Determining Positioning Effectiveness Analytical Positioning Models 24 Test Marketing 12
Customer and Competitor Research Research Studies Preference Maps Test Marketing Generates information about commercial feasibility and marketing program Provides market (sales forecasts) and effectiveness measures Positioning Models Incorporates research data into formal models of decision analysis 25 Positioning Errors Under-positioning customers have only vague ideas about the company and do not perceive anything distinctive about it Over-positioning Customers have too narrow an understanding of the company, product, or brand Confused positioning Frequent changes and contradictory messages confuse customers Doubtful positioning claims made for the product or brand are not regarded as credible 26 13
Illustrative Impacts of Changes in Business Strategy Restructuring on Targeting and Positioning Strategies Changes in Business Strategy Rapid Growth/ Retrenchment Changing the Product Mix Changing the Market Scope Repositioning Value Chain Integration Diversification Strategic Alliance Market Targeting Impact Market scope may not change although targets may be increased or reduced. No change is necessary unless increase in product scope creates opportunities in new segments. Targeting is likely to change to include new targets. Should not have a major effect on targeting strategy. Should have no effect on targeting strategy. Targeting strategies must be selected in new business areas. Targeting strategy may be affected based on the nature and scope of the alliance. 27 Positioning Impact Substantial changes in resource allocation, (e.g. advertising expenditures Changes in product strategy, methods of distribution, and promotional strategies may be necessary. Positioning strategy must be developed for each new target. Product, distribution, price, and promotion strategies may be affected. Primary impact on channel, pricing and promotion strategies. Positioning strategies must be developed (or acquired for the new business areas. Operating relationships and assignment or responsibilities must be established. Review Question Define the positioning strategy, list the positioning issues it addresses and the possible positioning errors. 28 14