CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights...

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CRAVENS CRAVENS PIERCY PIERCY 8/ 8/ e e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Transcript of CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights...

Page 1: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

CRAVENSCRAVENS

PIERCYPIERCY

8/e8/eMcGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All

Rights Reserved.

Page 2: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-2

Chapter Four

Strategic MarketSegmentation

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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4-3

STRATEGIC MARKET SEGMENTATION

Segmentation and market-driven strategy

Identifying market segments Forming segments Finer segmentation strategies Selecting the segmentation

strategy

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4-4

Segmentation and Market-Driven Strategy

SEGMENTS

VALUE OPPORTUNITIES

CAPABILITIES/ SEGMENT MATCH

TARGET(S)

POSITIONING STRATEGY

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4-5From Mass Markets to Micro Markets

OLD NEW

CONSUMERS Passively receive Empowered media userswhatever TV control and shape contentnetworks thanks to TiVo, iPod andbroadcast Internet

ASPIRATIONS To keep up with To standout from thethe crowd crowd

TV CHOICE Three networks Hundreds of channelsplus maybe a plus video on demand PBS station

MAGAZINES Age of the big Age of the special interestglossies: Time, magazine for every ageLife, Newsweek and affinity group

ADS Everyone hums Talking to a group of the Alka-Seltzer one, ads go everjingle narrower

BRANDS Rise of the big, Niche brands, productubiquitous brands extensions and massfrom Coca-Cola customization mean manyto Tide product variations

Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

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4-6

Identifying the Health and Beauty Supplies Market Segments

Level ofLevel ofCompetitionCompetition

Generic

ProductType

ProductVariant

Product Product DefinitionDefinition

Health &Beauty

Aids

ShavingEquipment

ElectricRazors

IllustrativeIllustrativeCompetitorsCompetitors

ConsumerProduct

Companies

Gillette, Remington,

Bic

Braun,Norelco,

Remington,Panasonic

Need/WantNeed/WantSatisfiedSatisfied

Enhancement

of Health & Beauty

Shaving

ElectricShaving

Page 7: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-7Exhibit 4-3

Market Segmentation Activities and Decisions

Market to beSegmented

Decide Howto Segment

FormSegments

FinerSegmentation

Strategies

StrategicAnalysis

of Segments

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4-8

Product Variant Segmentation

Product Type Segmentation

Generic Segmentation

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4-9

PurchaseBehavior

Characteristicsof People/

Organizations

UseSituation

Buyers’ Needs/

Preferences

Segmentation Variables

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4-10

Illustrative Segmentation Variables

Characteristicsof people/organizations

ConsumerMarkets

Industrial/OrganizationalMarkets

Age, gender,income,family size,lifecycle stage,geographiclocation,lifestyle

Type of industry,size, geographiclocation, corporateculture, stage ofdevelopment, producer/intermediary

Use situation Occasion, importance ofpurchase, priorexperience withproduct, userstatus

Application, purchasingprocedure(new task, modifiedrebuy, straightrebuy

Buyers’ needs/preferences

Brand loyaltystatus, brandpreference, benefits sought,quality, pronenessto make a deal

Performancerequirements, brandpreferences, desiredfeatures, servicerequirements

Purchasebehavior

Size of purchase,frequency ofpurchase

Volume, frequencyof purchase

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4-11

Requirements for Segmentation

SegmentationRequirements

Responsedifferences

Identifiablesegments

Actionablesegments

Favorablecost/benefit

Stabilityover time

Page 12: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-12

Approaches to Segment Identification

IDENTIFIERS OF CUSTOMER

GROUPS

CUSTOMER RESPONSEPROFILE

Characteristics of People and Organizations

Use Situation

Buyers Needs and Preferences

Purchase Behavior and Loyalty

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4-13

Segment Dimensions for Hotel Lodging Services

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4-14

llustrative Example: Gasoline Buyers

RoadWarriors

TrueBlues

GenerationF3 (Fuel,Food & Fast)

Homebodies

PriceShoppers

Higher-income, middle-agedmen, drive 25-50000 miles a year… buy premium with a credit card… purchase sandwiches and drinksfrom the convenience store… will sometimes use carwash

16% ofbuyers

Men and women with moderate tohigh incomes, loyal to a brand andsometimes a particular station …frequently buy premium, pay in cash

16% ofbuyers

Upwardly mobile men and women -half under 25 years of age - constantly on the go … drive a lotsnack heavily from the conveniencestore

27% ofbuyers

Usually housewives who shuttlechildren around during the day anduse whatever gas station is based ontown or on route of travel

21% ofbuyers

Not loyal to brand or station andrarely buy premium … frequently ontight budgets.

20% ofbuyers

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4-15

Illustrative Consumer Perception Map

LowQuality

HighQuality

Expensive

Inexpensive

GROUPI

GROUPV

GROUPIII

GROUPII

GROUPIV

• Brand E

• Brand D

• Brand C

• Brand B

• Brand A

Page 16: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-16

Finer Segmentation Strategies

Logic of finer segments– customized offerings– diverse customer base– close customer relationships

Finer segmentation strategies– microsegmentation– mass customization– variety-seeking strategy

Page 17: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-17

SELECTING THE SEGMENTATION

STRATEGY

Deciding how to segment Strategic analysis of market

segments– Customer analysis– Competitor analysis– Positioning analysis– Estimating segment attractiveness– Segmentation “fit” and implementation

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4-18

CustomerAnalysis

PositioningAnalysis

Financial andMarket

Attractiveness

CompetitorAnalysis

Strategic Analysis of Market Segments

Page 19: CRAVENS PIERCY PIERCY 8/e McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

4-19Exhibit 4-11

Segment Financial and Market Attractiveness

Estimated($ million)

Segment

X Y Z

Sales* 10 16 5

Variable costs* 4 9 3

Contribution margin* 6 7 2

Market share ~ 60% 30% 10%

Total segment sales 17 53 50

Segment position:

Business strength High Medium Low

Attractiveness # Medium Low High

*For a two-year period.~Percent of total sales in the segment.#Based upon a five-year projection.

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4-20

Segmentation “Fit” for ImplementationSegment Attractiveness

and Internal Compatibility

Internal Compatibility

Market SegmentAttractiveness

High Low

High

Low

Attractive segmentsthat match with

companycapabilities

Attractive segmentsbut with poor match

with companycapabilities

Unattractive segmentsthat do not match withcompany capabilities

Unattractive segmentsbut with match to

companycapabilities


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