Principles of Marketing Part 2 1 Lesson 5 STP procedure Outline S -T -P market segmentation market targeting positioning 1
STP What Is It? Segmenting Dividing market according to some set of criteria into relatively homogeneous groups of customers Targeting Involves determining the atracttiveness and profitability of created segments and then choosing the strategy Positioning Creating value and image of company s offer, which should lead to getting a distinguished and important place in consumers minds through differentiation and developing competitive advantage 4 Phases in STP Procedure Segmenting 1. Identification of segmentation criteria 2. Dividing the market 3. Defining a profile of each segment Targeting Positioning 1. Segment attractiveness assessment 2. Segment profitability assessment 3. Choosing market strategy 1. Differentiation tools 2. Positioning process 5 SEGMENTATION 2
Segmentation Benefits Adjusting product to consumer s needs Greater effectiveness of financial means Noticing market changes and faster adaptation Segmentation: Conditions Do customers have similar needs and wants? Can we collect information about the segment? Are the segments profitable? Can the segments be reached? SENSITIVITY MEASURABILITY SIZEABLE ACCESSABILITY S E G M E N T A T I O N Internally homogeneous, externally heterogeneous Criteria and Descriptors Segmentation criteria (basis) Characteristics used for describing customers, which allow distinguishing different market segments Descriptors Additional consumer characteristics 9 3
Segmentation Criteria 4 B2C Demographics Gender, age, family size, family life cycle Geographic Size of town, administative, climate Socio-economical Education, job, social class, religion, race, nationality, income Psychographic Personality, lifestyle, innovativeness, risk taking Behavioral Status, consumption level, brand loyalty, attitude towards the product, purchase readiness Preferencial type of preferred benefits, place of purchase, reason of purchase 10 Segmentation Criteria 4 B2B Main Organization size, geographical scope, industry, type of organization, user status, location Operational technology, average product usage, average order size, financial capabilities Attitude towards purchase Preferrences Organizational structure, supply funcion, way of dealing with transactions Preferred benefits, ways of obtaining products, length of contract Personal qualities Buyer-seller likeliness, loyalty, risk taking 11 Matrix Segmentation - Sweetener Health issues No health issues Ageand consumption place Adults home diabetics overweight dieting innovators other DIABETICS OVER WEIGHT ON DIET INNOVA TORS Kids home X X X Adults- HORECA Kids- HORECA HORECA X 4
Segment Attractiveness Assessment Segment Attractiveness Demand Criteria Competition Criteria Accessability Criteria Current size Numberof competitors Company awareness Growth dynamics Exit barriers Access to distribution Potential size Offer differentiation Adjustment Substitutes 13 Market Service Strategy Mass marketing Full-scope marketing Selective marketing Concentrate dmarketing big segment Concentrate dmarketing small segment Niche marketing 1-2-1 marketing quality No problems No problems Low costs quality Niche A Low costs Low costs 14 POSITIONING 5
Positioning- Phases Identification of attributes which distinguish theofferon themarket Defining competitors market position Market position selection positioning process Matching the offer with positioning strategy Communication 16 Choosing Market Position Positioning Howmany differences 1 dimension 2 dimensions Multidimentional What differences Important Out-standing Safe Connected Additional criteria How Strengthening current position Seeking new position Competition repositiong 17 Positioning 1D Creation of Unique Selling Proposition focuson one quality/attributeand tryto becomea leader in that field Ferrari Number 1 among sport cars 18 6
Positioning 2D Positioning is based on two attributes which distinguish the offer on the market, there should be logical connection between those attributes Etopiryna Fast W lot usuwa ból ( Removes pain in a blink of an eye ) Popular Goździkowa przypomina na ból głowy Etopiryna ( Goździkowa reminds: Etopiryna for headache ) 19 Multidimential Positioning Positioning based on 3+ attributes risk of losing credibility and expressiveness GlaxoSmithKline AQUAFRESH 3 benefits: Protection against decay Fresh breath White teeth 20 What Differences Important Outstanding Safe Logically connected Other: profitable, easy to communicate 21 7
Communicating Main issue: Design the content of promotion Complementing elements: Forms and tools of promotion Distribution channels Points of sale and customer service Product Packaging Price 22 Positioning Mistakes Wrong positioning Product/brand do not have a desired place on the market (in consumers minds) Limited Do not manage to convey the real and full image of a product/brand Misleading Product/brand do not have an obvious and clear image (frequent changes) Doubtful Attributes used in positioning strategy are not convincing 23 Lesson 6-9 Marketing mix 8
Lesson 6-9 Product decisions Promotion Distribution Price Product Product definition Product everything (set of functional, social & psychological benefits for a customer), which can be offered for consumption, usage, spending time, etc., in order to satisfy customer s needs in the exchange process 27 9
Types of Product Tangible goods Services Celebrities Organizations Places Ideas Events Symbols 28 Marketing Decisions Regarding Product 1. Market assortment planning 2. Individual product attributes 3. New product planning 4. Product life cycle 29 Market Assortment Assortment width Length of product line Depth of product type Assortment integrity Product system 30 10
Assortment Width number of assortment groups in the company 31 Assortment Length variety of product types and brands within each of the assortment group 32 Starting point Assortment Length Upstretching Downstretching Up&down stretching Brand C Brand C Brand A Brand A Brand A Brand A Brand B Brand B Brand B Brand B Brand D Brand D 33 11
Starting point Assortment Length Filling-in the line Modernizing the line Deleting product forms Brand A Brand A Brand A Brand C Brand A Brand C Brand C Brand B Brand B Brand B Brand B Brand D 34 Assortment Depth Variety of item options within a particular product type 35 customer Market Assortment Integrity Are the products offered to the same customer group? functional Are assortment groups complementary or satisfy different needs? technological Can the same machines, technology, know how be used to produce these goods? supply Can the same materials, resources and components be used? distribution Cant the same distribution channels and sales methods be used? promotional Can the same promotion forms and tools be used? logistics Can the goods be offered, transported, stored in the same way? vertical Is company s activity a part of the same market system (industry, branch)? 36 12
Product System Set of products and services (usually complementary) sold together (in one package or collection under one brand) used to satisfy a particular consumer s need and generating synergy effect 37 Product - levels Product Levels Tangible (formal) product installation Core product delivery brand packaging core benefit... features after sale service quality styling warranty Augmented (enhanced) product credit 13
Core Product Set of benefits offered to consumers within a particular product basic benefits supplementing benefits drill making holes car transportation beer entertaining way of satisfying thirst Formal Product Sum of utilitarian and functional value (quality) in a particular project offered in a packaging (sometimes) and under a certain brand name which allows realization of a particular set of benefits delivered in a product Technical characteristics Technical parameters Accordance of quality with technical parameters Style Size Identification, instruction Packaging Brand (name, logo) Brand Brand -name, sign, symbol, pattern or a combination of all the above, given by a seller in order to identify and differentiate the product among the competition 14
Brand: Decisions Functions: Identification Guarrante Promotional Meaning of a brand: qualities benefits values culture personality user 1. Shall We Brand?.. YES NO GENERIC products 2. Who Is The Sponsor? Producer Intermediary Mixed 15
3. How Can We Obtain a Brand? create own buy licence 4. How To Brand? individual brand name family brand (the same for all the assortment) mixed brand Benefits From Branding Higher price Convenient ordering Allows legal protection of a product Helps building customer loyalty Facilitates market segmentation Helps building company s image 16
Enhanced Product Pre&post sales services Guarantee length and scope Service speed and scope Alternative usage forms Loans Return policy Re-buying of the used product Sale of certified products Cycle - Profit Relationship introduction growth maturity decline profit time The Process of NPD idea generation screening concept development and testing marketing strategy business analysis product development market testing commercialisation 17
DesigningMarketing Strategies Promotion Promotion promotion tools - advertising - sales promotion - public relations - personal selling - direct selling Principle Methods Direct Marketing Advertising Public Relations Personal Selling Sales Promotion 18
Communication at Work Differentiates between competitors, substitutes and alternatives. Reminds and re-enforces past transactions. Makes future dealings desirable. Informs makes potential customers / users aware of offer. Essential to diffuse information. Persuades influences the decision making process. Makes the exchange desirable. Marketing Communications Source: Fill, 1999 A management process through which an organisation enters into a dialogue with its various audiences.. the objective of the process is to (re)position the organisation and/or their offerings, in the mind of each member of the target audience in a consistent and likeable way. The Promotional Toolbox -a Bag of Marbles Personal selling? Sponsorship Field marketing Advertising Word of mouth Commerce Internal marketing Packaging Point of Purchase Sales promotion Consumer Audience Channel Audience Stakeholder Audience Corporate identity Website Direct marketing Exhibitions Branding Perception Public relations 19
Push and Pull Strategy Push strategy-decision to concentrate communications effort on the members of the distribution channel, i.e. the wholesaler and retailers Pull strategy-in contrast to the push, creating demand for the product through direct communication with the customers both push & pull strategy-in order to assert as much influence as possible on the supply chain and the customer Possible Communications Objectives clarification of customer needs increasing brand awareness increasing product knowledge improving brand image improving company image increasing brand preference stimulating search behaviour increasing trial purchase increasing repeat purchase increasing word-of-mouth recommendation improving financial position increasing co-operation from the trade enhancing the reputation with key stakeholder building up management ego... Advertising Is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor Major decisions (5 Ms): - Mission: What are the advertising objectives? -Money: How much can be spend? - Message: What message should be sent? -Media: What media should be used? - Measurement: How should the results be evaluated? 20
Pros Cons Wide range Low cost of reaching a single customer High control Appeals to emotions Feedback may be delayed Highly standardized message Some forms very expensive Limited information capacity Good Advertisement: High visibility Appeals to emotions Close in time and space Originality Accessible information repetitive Associated with info already known: memories, tradition, stereotypes Persuasive Advertising Tools TV commercials Radio commercials Newspaper and magazine ads Exhibition and POS Outdoor Internet 21
Sales Promotion A range of tactical marketing techniques designed within a strategic marketing frameworktoaddvaluetoaproductorservice in order to achieve specific sales and marketing objectives Short-term incentives motivating customers to (faster) purchase decision or buying more; intermediaries are encouraged to sell more and more actively Sales Promotion Customer incentives - Free samples - Lotteries and contests - Discounts - Coupons - Refunds - Presentations, degustation, demonstrations - Prizes for loyalty Intermediaries incentives - Price discounts - Help with exhibitions - Product samples - Information and promotion materials - Influencing the staff - Exhibitions, trade shows, etc - Refunds Pros + quick feedback + liked by buyers + increases impulse shopping + adds value to a product + develops cooperation in distribution channels Cons -Can be used in shortterm -Later customers do not want to buy products on regular conditions -Worsens company s image -May push customer s attention towards less important factors (price-payment) 22
Public Relations PR is a planned and sustained efford to establish and maintain goodwill and mutual understanding between an organization and its publics (e.g. Customer groups, local and central government, the general public, financial institution, the media, employees) Public Relations Objectives to create and maintain the corporate and brand image to enhance the position and standing of the organization in the eyes of public to communicate the organization s ethos, philosophy, corporate values to disseminate information to the public to undertake damage limitation activities to overcome poor publicity for the organization to raise the company profile and forge stronger, lasting, customer and supply chain relationships Pros Cons + high credibility + lower costs + can be used when advertising is prohibited + mass receiver + can reach customers avoiding advertising -Low control over the place, time, and content of information presented -Difficulty in planning activities -Impossible to familiarize customers with offer details 23
Public Relations publicity internal communication and with cooperators sponsoring corporate identity lobbying crisis communication Personal Selling An interpersonal communication tool which involves face-to-face activities undertaken by individuals, often representing an organization, in order to inform, persuade or remind an individual or group to take appropriate action, as required by the sponsor s representative Pros Cons + Fast feedback -High cost of reaching a customer and passing + Information range can be the info easily adjusted + Possibility of info exchange + Relatively high effectiveness of seller s personal influence on purchase decisions -Low effectiveness when a customer does not know much about the offer -Only a very limited number of customers can be reached 24
Direct Marketing Direct Marketing Personal, persuasive communication by people both employed and not employed by the company OR An interactive system of marketing which uses one or more advertising media to effect a measurable response and or transaction at any location (US Direct Marketing Association) Direct Marketing Includes Direct Mail Telemarketing Magazine Inserts Door to Door Distributions Mail Order Features Advertising and selling combined Results are measurable High degree of flexibility Easily controllable Highly selective Economic Direct Marketing Benefits ability to target to the individual allows personalisation supplies a response mechanism and reinforcement for other media scope for vast use of different creative formats highly sophisticated testing 25
The Principal Characteristics of Communications Tools Advert. Sales promotion Communications PR Personal selling Direct marketing Ability to deliver personal messages Scope for reaching large audiences Degree of interaction Perceived credibility by target audiences Low Low Low High High High Medium Medium Low Medium Low Low Low High High Low Medium High Medium Medium The Principal Characteristics of Communications Tools Costs Advert. Sales promotion PR Personal selling Direct marketing Absolute costs High Medium Low High Medium Cost per contact Low Medium Low High High Wastage levels High Medium High Low Low Level of investment High Medium Low High Medium The Principal Characteristics of Communications Tools Control Advert. Sales promotion PR Personal selling Direct marketing Scope for targeting specific audiences Medium High Low Medium High Management s ability to adjust the deployment of the tool ws circumstances change Medium High Low Medium High 26
Distribution Distribution Outline selecting marketing channels - direct vs. indirect channels - number of channel levels - number of intermediaries - vertical marketing systems Distribution channels The distribution channel consists of a group of individuals or organizations that assists in getting the product to the right placeattherighttime. 27
Selecting the Channels of Distribution What are the product characteristics and how do they affect methods of distribution? Who are our customers? Where are our customers? What are our customers requirements? How, when and where do they want to buy our products? What are our competitors doing by way of distribution? What is the cost of distribution? What are the legal and regulatory constraints of distribution? Company Sales Force or Manufacturer s Sales Agency? Selling costs ($) Manufacturer s sales agency Company sales force Level of sales ($) Channel Design Decisions channels levels number of intermediaries at each channel level vertical marketing systems 28
Channel Levels short vs. long channel (from one to three level) key factors: - average order size - geographic concentration of customers - seasonality of sales - geographical distance from producer to market -perishability of the product Number of intermediaries Three strategies: intensive distribution-as many available outlets as possible hold this product; products for which consumers require a great deal of location convenience selective distribution-more than a few but less than all of the intermediaries exclusive distribution-severely limiting the number of intermediaries; even only one outlet in a certain geographic area supplies a product Intensive distribution Key characteristic include: maximum number of outlets covered to maximize availability target outlets in as many geographical regions as possible consumer convenience products high number of purchasers high purchase frequency impulsive purchase low price 29
Selective distribution Key characteristic include: medium level of customers -but likely to be significant less intensive distribution f outlets retailers may require specialist knowledge shopping based products purchase is occasional purchase is more likely to be planned medium price Exclusive distribution Key characteristic include: relatively few customers limited retail outlet close retailer/customer relationship speciality products infrequent purchase high involvement and planned purchase high price Channel integration VMS (vertical marketing systems) or horizontal Vertical -two or more channel members from different levels coordinate or manage channel activities to achieve efficient, low-cost distribution (aimed at satisfying target market customers) Horizontal-combination of institutions at the same level of channel operation under one management 30
. DesigningMarketing Strategies Price Price Outline setting price - calculation of price range - selecting the final price Price decisions selecting the pricing objective determining demand estimating costs analyzing competitors costs, prices and offers selecting a pricing method selecting the final price 31
Selecting the Pricing Objective survival maximum current profit maximum current revenue maximum sales growth maximum market skimming product-quality leadership Determining Demand price sensitivity price elasticity of demand Estimating Costs fixed costs variable costs total costs 32
Analyzing Competitors Costs, Prices and Offers typical methods main findings Selecting a Pricing Method markup pricing target-return pricing perceived-value pricing value pricing going-rate pricing auction-type pricing group pricing Selecting the Final Price psychological pricing gain-and-risk-sharing pricing influence of other marketing-mix elements company pricing policies 33
Adapting the Price geographical pricing price discounts promotional pricing discriminatory pricing 34