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2002 Edition Vitale and Giglierano Chapter 7 Segmenting, Targeting, and Positioning Prepared by John...
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Transcript of 2002 Edition Vitale and Giglierano Chapter 7 Segmenting, Targeting, and Positioning Prepared by John...
2002 Edition
Vitale and Giglierano
Chapter 7Segmenting, Targeting, and Positioning
Prepared by John T. Drea, Western Illinois University
3 Basic Concepts in B2B Marketing
Segmenting Targeting Positioning
Basic Ideas of Segmentation
Marketers seek to create market segments that have the characteristics of
Measureability
Accessibility
Substantiality
Actionability
MeasureabilityCan we understand the size and needs of the market segment?
AccessibilityCan we communicate with the segment so that serving the segment is possible?
SubstantialityDoes the segment desire that values that an offering presents?
ActionabilityCan we create a competitive advantage with respect to the needs of the segment?
Common Bases for
Segmentation
By product offered
By industry in which the customer
participates
By size of the customer’s
company
By buying behavior
By technologyused by thecustomer
By size of account
By geographicregion
Value-Based SegmentationValue: the sum of the benefits minus the sum of the costs
Companies should try to choose and address segments that are homogenous in the kinds of value sought.
HomogenousSegments
HeterogenousSegments
Analytic Approach to Segmentation
Analytic approaches need two sets of data:1) Information about segment size and growth
• Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes are useful.
2) Information about each targeted segments needs and buying behavior.
Exhibit 7-3: Hypothetical Segmentation Data
• From secondary data (US Census data)– Number of business with 50-500 employees 375,000
• From quick survey of consultants– Seg 1: Major turnaround 10%– Seg 2: Stopping deterioration 20%– Seg 3: Competitive improvement 30%– Seg 4: Specific area improvement1 50%
• From Delphi estimate of small business consultants:– Seg 1: Change in major turnaround by 2002 +100%– Seg 2: Change in stopping deterioration by 2002 +100%– Seg 3: Change in competitive improvement by 2002 -50%– Seg 4: Change in specific area improvement by 2002 +150%
1 – can overlap with other categories
Exhibit 7-4: Hypothetical Sizes of Market Segments
Segment # of Small Businesses
in 2000
# of Small Businesses
in 2002
Change, 2000 to
2002Segment 1 – Major turnaround
37,500 75,000 100%
Segment 2 - Stopping deterioration
75,000 150,000 100%
Segment 3 - Competitive improvement
112,500 56,250 (50%)
Segment 4 – Specific area improvement
112,500 281,250 150%
•This shows how an analytic approach can be used to estimate segment size and growth.•To complete the analysis, data is also needed on the needs and buying behavior for each segment. Go to Exhibit 7-6
Segmentation by Discovery
• Sometimes, a business starts serving only 1-2 large customers.
• Over time, additional customers who seek something similar to the original offering are recruited/attracted. In this way, a new segment is “discovered.”
• Field marketing personnel must be coached to recognize such discovery opportunities.
• Proprietary information of different customers must be respected.
Exhibit 7-5 Factors in Assessing Segment Attractiveness
•Size of segment•Growth rate of segment•Intensity of unmet needs•Reachability of segment through communication channels•Readiness of segment to reach and adopt a solution•Likelihood of competitive intensity•Sufficiency of channel reach•Likely value contribution by channel(s)•Match between segment needs and supplier’s strengths•Differentiability of supplier’s offering•Opportunity to achieve strategic goal by addressing segment•Opportunity to achieve learning goal by addressing segments
Attractiveness of SegmentsMarket
Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
Market Attractiveness
Market Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
•Large and fast growing segments are more attractive than smaller and slow-growing segments•This necessitates accurately predicting future growth.•Other issues include
•Adaptability of market segments,•Existing relationships with the buying center members, and•Available customer’s budget
Competitive Attractiveness
Market Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
•What is the likely existence or emergence of competition in the market segment?•Are there barriers to entry facing competitors?•Does being first to market provide an advantage?
Channel Attractiveness
Market Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
•It is preferable to target customers already served by well-established marketing channels, or if an existing channel can be adapted, it may serve the segment.•When there is no suitable existing channel, a market view of competition may be necessary.
•How is the existing need being met?•Will customers switch?
Internal Attractiveness
Market Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
•A segment is more attractive when the segment’s needs can be met by the firm’s core competencies.•This is identified through environmental analysis.
Exhibit 7-6 Segment AttractivenessSegment 1
Major Turnaround
Segment 2: Stopping
Deterioration
Segment 3: Competitive
Improvement
Segment 4: Specific Area Improvement
Potential Size in 2000 (in millions)
2$187.5
3 $375.0
4$562.5
4$562.5
Growth, % by 2002 4+100%
4 +100%
1-50%
5+150%
Need strength 5 4 3.5 3.5
Competitive strength 3 3 4 3
Channel reach 5 5 5 5
Communications reach
4 4 4 4
Capability fit 2 5 5 2
Price sensitivity 2 3 4 3
Overall attractiveness (sum of attribute scores)
27 31 30.5 29.5
Attractiveness – Other Considerations
Market Attractiveness
Competitive Attractiveness
Channel Attractiveness
Internal Attractiveness
Attractiveness – OtherConsiderations
•Other factors that might cause a segment to rated higher or lower include:
•Public policy (excessive government regulation can cause a segment to be downgraded)•Organizational goals (market share goals may make firms more aggressive in targeting)
Standardization and Successful Standardization and Successful E-Business RelationshipsE-Business Relationships
Standardization
Data Standards• EDI
• XML
• Others (ASCI X12, UD/EDIFACT)
• IDW - Rosetta.net
Process Standards• Covisint.com
Standards
• History of standardization- Arabic numeral system- Phoenix alphabets
• Need• Challenges
- Loss of individuality- Resistance by the backward
• Recent developments- ISO 9000- Euro
Back Office Integration
DistributorPurchase
orderSys tem
DistributorsorderSi te
BackOffice
Integration
DistributorCustomer
orderprocessing
DistributorERP
Customersorder
Sys tem
ManufacturerTechnical
Support
BackOffice
Integration
E-MARKETINGE-SALESE-RESOURCEMANAGEMENT
ManufacturerCustomer order processing
E-SALES E-MARKETING
Back Office Integration as part of the E-channel
Back Office Integration
Two challenges:
•Transitioning from Tacit to Explicit
•Increasing Tacit Knowledge
Explicit knowledge is commodity(inventory availability, pricing, specifications…)
Explicit knowledge on the internet
Real Time
Challenges in Real Time information– Up to the minute information on inventories– Pricing and Discount Structure – Transferring Technical Information– Custom made Quotes and jobs– Standardization and formats
Standardization
•System-to-System connection needs standardization•Non-standardized processes are expensive
XML and Standardization
•SGML - HTML - XML
•Benefits and Limitations
XML
Alphabet
Telephone
Business Process
Grammar
Words
Sound
Human-to-Human Exchange
HTML/XML
E-Business Application
????
Internet
EDI usingXML
ANSI X12 / UNEDIFACT
EDI Translator
Business Rules
VAN/Leased Lines etc
Traditional EDI
EDI versus Human versus XML Based Information Exchange
Emerging Standards
XML
ANSI X12
UN/EDIFACT
SHTML
EDI
Cost (VAN)
Role of:IDW, Rosettanet, CommerceNet,
O.A.S.I.S
B2B platforms need standard EDI principles
Evolution Will Continue
Data Standardization is external and evolving
Process standardization is within and strategic
Firms must adapt to both
Tools determine success and are thus critical
The Vision is Clear
•The implementation will be long and difficult.•Some of the technology is not here yet but is coming soon.•When the technology is fully enabled, the race will become brutal and poorly prepared firms will be eliminated.•Redesigning processes is the priority now.•Companies need an E-Business strategy and implementation plan now to stay ahead of the technology changes.