University of Washington EMBA ProgramRegional 20

Marketing Management

“Setting Objectives &

Marketing Strategy: Segmentation, Targeting and Positioning (STP)”

Instructor: Elizabeth Stearns

Customers

Competitors Competitors

Profits

Survival

Thrive

Course Structure

The Marketing Framework/Concept

Analysis5C’s Opportunity Analysis

Marketing Strategy & Customer StrategyGoal Setting, Segmentation, Targeting, and Positioning

Implementation/Action PlansMarketing Mix (4 P’s)

MarketingResearch

Hierarchy of Strategy

Corporate

Strategic Business Unit (SBU)

Product-Market

StrategyFormulation

ProgramFormulation

Contention

DifferingPerspectives

Marketing

FinanceHuman Resources

R&D

Operations

Sales

Project Planning

Consensus Execution

CoordinationCreativity

The Strategy Development and Implementation Process

Marketing Strategy & Objectives

• Marketing Strategy:Marketing Strategy: A game plan for achieving objectives

Typically a set of customer and competitor targets plus Typically a set of customer and competitor targets plus a positioning, a framing of the organization’s offer in a positioning, a framing of the organization’s offer in the minds of customersthe minds of customers

• Objectives:Objectives: Means of evaluating performance

• Caveat: Consider that the position of your product in the Product Life Cycle may influence your strategy

Setting Objectives

• PurposePurpose

To identify the results we wish to achieve in the market segments and provide a platform for measurement and evaluation.

• Types of Marketing Objectives

– Strategic: Qualitative and directional

– Operational: Quantitative and time dependent (SMART)

Select Dimensions for Operational Marketing Objectives

Pre-Sale

Financial Oriented Volume Oriented

Sale

Post-Sale

Awareness

Attitude

Purchase Intention Dollars (Nominal, Real)

Units

Growth Market Share

Trial, Repeat

Contribution Bottom Line

Profit

Cash Generated

Gross Spreads

Return on Investment

Customer Satisfaction

Consideration

Strategic Focus and Customer Targeting

ROI

Improve Efficiency

Improve Price

Reduce Investment

Change Sales Mix

Reduce Costs

Strategic Focus and Customer Targeting

ROI

Increase SalesVolume (units)from customers

ImproveEfficiency

ImprovePrice

ReduceInvestment

ChangeSales Mix

ReduceCosts

Retain existingcustomers

More business fromcurrent customers

Non Users

Competitors'customers

A Note on Sources of VolumeMany objectives are “growth” oriented.Many objectives are “growth” oriented.

• Where does growth come from?– Primary demand = “New” volume

• New users into the market• Getting current users to use more• Get same users to use for a “new” purpose

– Secondary demand = “Somebody else’s” volume• Take volume from competitors

• Caveats– Beware of cannibalization—it’s not really growth– Stimulating secondary demand implies a competitive

response

Using Objectives in Alternatives & Recommendations Choice

• Write an operational marketing objective• Project all viable alternatives onto the dimension of the

objective use expected value of outcome• Measure the “attractiveness” of each alternative according

to whether/the degree to which it satisfies your operational marketing objective– If only 1 alternative meets your objective—choose it– If 2 or more alternatives meet your objective…

• Choose the one which performs best on the dimension underlying your objective

• Move to “tiebreaker” criteria– Risk/variance in performance– Cost– “Fit”– Etc.

Objectives Statements

• Our primary objective in the loudspeaker market is to grow market share from 25% to 30% by stealing share from competitors in 2003 while maintaining margins at 23%. (What is wrong with this?)

• Our task is to generate $70 million cash flow from mainframes in both 2003 and 2004, while maintaining dollar-denominated market share at 45%.

– Primary objectives are most important– Secondary objectives are relevant and desirable, but

tradeoffs for primary objectives are acceptable

Overview of STP Process1. Identify Segmentation/segmentation

bases and segment the market.

2. Develop profiles of the resulting Segments.

1. Evaluate the attractiveness of each Segment.

2. Select target Segment(s).

1. Identify possible positioning concepts for each Segment.

2. Select, develop, and communicate the chosen positioning.

SegmentatiSegmentationon

PositioningPositioning

TargetingTargeting

Steps in Market Segmentation, Targeting,and Positioning

1. Identifysegmentationvariables andsegment themarket

2. Develop profiles ofresultingsegments

MarketMarketSegmentationSegmentation

3. Evaluateattractivenessof eachsegment

4. Select thetargetsegment(s)

MarketMarketTargetingTargeting

5. Identifypossible

positioningconcepts foreach target

segment

6. Select,develop, andcommunicate

the chosenpositioning

concept

MarketMarketPositioningPositioning

©2000 Prentice Hall

Market Segmentation

• The process of grouping actual and potential customers in a market for the purpose of selecting targets for effort and designing marketing strategies and programs for them

Market Segment

• A group of actual or potential customers with similar characteristics, who seek similar sets of benefits and attach the same importance to their satisfaction

Taxonomy at the Pump:Five Types of Gasoline Buyers

Road Warriors: Generally higher-Income, middle -aged men who drive 25,000 to 50,000 miles a year . . . buy premium with a credit card . . . purchase sandwiches and drinks from the convenience store . . . will sometimes wash their cars at the carwash. 18% of buyers

True Blues: Usually men and women with moderate to high incomes who are loyal to a brand and sometimes to a particular station . . . frequently buy premium gasoline and pay cash. 16% of buyers

Generation F3 (for fuel, food and fast): Upwardly mobile men and women-half under 25 years of age-who are constantly on the go . . . drive a lot and snack heavily from the convenience store. 27% of buyers

Homebodies: Usually housewives who shuttle their children around during the day and use whatever gasoline station is based in town or along their route of travel. 21% of buyers

Price Shoppers: Generally aren't loyal to either a brand or a particular station, and rarely buy the premium line . . . frequently on tight budgets . . . efforts to woo them have been the basis of marketing strategies for years. 20% of buyers

® Mobil Oil Company

Process: Example

Usage-based Segmentation for an Established Product/Service

IDENTIFYING SEGMENTSIDENTIFYING SEGMENTS DESCRIBING SEGMENTS DESCRIBING SEGMENTS

BASES LEVELSBASES LEVELS STRATEGIC IMPACT STRATEGIC IMPACTDEMOGRAPHICS/ MEDIA VALUEDEMOGRAPHICS/ MEDIA VALUE

PSYCHOGRAPHICSPSYCHOGRAPHICS TECHNOS $$Use of product/service?

Brand used?

Level of use?

Occasion of use?

Motivation for use?

• Nonuser• User

• My Brand• Competitor’s brand

• Heavy• Moderate• Light

• Time of day• Season

• Self /Other• Functional/. Psychic

Describe levels in terms of $$$,Demographics Psychographics, Media Habits, Lifestage, Technos, etc.

Category versusBrand Build

Loyalty versusSwitching

Value of a customer, Efficiency

Image Focus versus Attribute Focus, Timing

Form of the value equation

Process

Purpose of Forming Market Segments

• To form the closest possible match between customers’ needs or wants and priorities, and the firm’s offer, such that customer satisfaction is maximized and competitive advantage is created. As a result, unit volume and/or price increases, and profits are enhanced

Segmentation

• Dividing up the market into groups of consumers who share similar needs (and who respond similarly to marketing mix variables)

– Account for customers’ diverse needs and differing behaviors in its strategy

– Design the marketing mix to more closely match customer needs

– Improve efficiency and effectiveness of resource allocation

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

• Segments must be large or profitable enough to serve.

• Segments can be effectively reached and served.

ActionableActionable

• Size, purchasing power, profiles of segments can be measured.

• Segments must respond differently to

different marketing mix elements & actions.

• Must be able to attract and serve

the segments.

Effective Segmentation

©2000 Prentice Hall

Targeting

• Key Questions(Review)– Selectivity: Which segments will we address?– Concession: Which segments will we leave to

others?– Concentration: What is the relative degree of effort

we will place on each segment we choose to pursue?

• Select segments to pursue according to your possession of Differential/Customer Advantage

Reis and Trout

Positioning: The battle for your customer’s mind

Ready-to-Eat Cereal

Apple Jacks

Trix

Cocoa Crispies

Special K

TotalProduct 19

Shredded Wheat

Frosted FlakesLucky Charms

Raisin Bran

Life

Corn Chex

Cheerios

Sun Country Granola

Fruit Loops

Hearty Granola

Wheaties

High Sugar Content

No Sugar

$$$$

USA: BEER CATEGORY MAP

Miller Lite

Coors Lite

Amstel Light

Light

Bass

Pete’s Wicked Ale Rolling Rock

Guinness

Foster’s

Becks

Corona Samuel Adams

Molson Ice

Budweiser Michelob

Red Dog

Busch

Specialty

Traditional

Source: Simmons SMM 1998

Positioning Maps/Perceptual Space

USA: BEER CATEGORY MAP

Miller Lite

Coors Lite

Amstel Light

Light I am driving.

Most of the time I am trying to lose weight.

It’s important to attend religious services.

I enjoy watching religious TV programs.

I am a Conservative Evangelical Christian. I enjoy eating foreign foods.

I exercise regularly.

I really enjoy shopping for clothes.

I am willing to volunteer for Environmental Organizations.

Bass

Pete’s Wicked Ale Rolling Rock

Guinness

Foster’s

Becks

Corona Samuel Adams

I’m not too concerned about my appearance.

I like to do things unconventional.

I like to be outrageous.

I feel very alone in the world.

I’m no good at saving money.

Women are more suited

to running homes.

There is little I can do to change my life.

Money is the best measure of success.

Molson Ice

Budweiser Michelob

Red Dog

Busch

Specialty

Traditional

Source: Simmons SMM 1998

Simmons Data

Positioning and Perceptual Maps

• What brands are perceived as similar to others?

– Deals with issue of substitutability.

– if customer’s brand is not available, what brand is

most likely to be purchased?

– Unique Position

» Or

– Easy switching

Positioning and Perceptual Maps

• What holes exist for repositioning an old, or new product introduction? (Point on map where no competitive brands exist)– Opportunity or not?

• Ideal points = Preference maps

– If customer could have any product they wished.

……is the act of designing the is the act of designing the company’s offering and image to company’s offering and image to

occupy a distinctive place in the the occupy a distinctive place in the the

target market’s mind.target market’s mind.

©2000 Prentice Hall

PositioningPositioning

Positioning

• Positioning: Positioning: The act of framing the organization’s image and its offer in the target customer’s minds, so it occupies a distinct and valued place relative to competition.

• The process we use to set ourselves apart from competitors in the minds of the customer.

Four D’s of Effective Positioning

Successful positioning requires:

• Defining what the brand is.• Differentiating the brand from other similar

offers.• Deepening the brand’s connection to

consumer’s goals.• Defending the position as competitors react.

Example: Competitor Targets 7UP

• Direct Competitors in the same product formDirect Competitors in the same product form

• The Generalized Set of Competitors in the The Generalized Set of Competitors in the same product formsame product form

• Competitors in a different product form that Competitors in a different product form that satisfies the same basic need.satisfies the same basic need.

Think of your positioning statement as leading to a piece of advertising

(define, differentiate, deepen, defend)

• Does it help overcome the pitfalls of positioning:Does it help overcome the pitfalls of positioning:-- Underpositioning Underpositioning Customers cannot sense the difference.- Overpositioning Overpositioning Our offer projects too narrow an image.- Confusing PositioningConfusing Positioning

We make too many claims, or keep changing the claims over time.

-- Doubtful PositioningDoubtful PositioningConsumers find our claims hard to believe.

• Will it find a way into our customer’s mind and will it stay there?

• Is it about your customer or is it about the product? (selling or marketing?)

Developing Positioning Statements

• Customer Target:Customer Target: Person(s) in whose mind(s) we want to create the perception or image and whose behavior we hope to affect

• Frame of Reference:Frame of Reference: Competitive offer(s) from whom we wish to differentiate ourselves in order to provide a reference point for the customer

• Compelling Point of Difference:Compelling Point of Difference: How our offer fits into the customer’s frame of reference better than competing alternatives—and reasons to believe that difference.

Developing Positioning Statements

Selecting Frames of ReferenceSelecting Frames of Reference

• Competitive– Direct competitors in the same product form– Generalized set of competitors in the same product

form– Competitors in a different product form that satisfy

the same basic benefit requirements

• Benefit-based– Reference is customers’ goals and values

Developing Positioning Statements

Point of DifferencePoint of Difference

• Core Strategy: The benefits we intend to emphasize in our communications to our core customer targets (how we get customers to buy from us rather than competitors)

– Exploit Differential Advantage– Communicate key benefit in a clear, concise

statement

Developing Positioning StatementsCustomer Target:Customer Target: Person(s) in whose mind(s) we want to create

the perception or image and whose behavior we hope to affect

Frame of Reference:Frame of Reference: Competitive offer(s) or counterfactuals from whom we wish to differentiate ourselves in order to provide a reference point for the customer

Compelling Point of Difference:Compelling Point of Difference: How our offer fits into the customer’s frame of reference better than competing alternatives—and reasons to believe that difference.

To _____ (customer target description)To _____ (customer target description)……my organization is the _____ (frame of reference)my organization is the _____ (frame of reference)

……that ____ (point of difference) that ____ (point of difference) because ____ (reason to believe dif.)because ____ (reason to believe dif.)better than ____. (competitive target)better than ____. (competitive target)

Positioning: Asics Gel MC Plus

Positioning Statement:Positioning Statement: To Michele, the recreational marathoner who risks injury when she trains on uneven surfaces, Asics MotionControl Plus puts you back in control because it prevents overpronation better than any other training shoe.

• Tag-line:Tag-line: You can’t control the road, but you can control the way your foot reacts to it with Asics Gel MC Plus.

Positioning: Asics Gel Kayano

• Positioning Statement:Positioning Statement: To Marc, the recreational runner who places a premium on enjoying the running experience, the Asics Gel Kayano provides better cushioning than any other shoe on every stride he takes through the Impact Guidance System.

• Tag-line:Tag-line: Heel-to-toe comfort for a smooth ride.

Positioning: Reebok Boston Road

• Positioning Statement:Positioning Statement: To Marc, the recreational runner who places a premium on enjoying the running experience, the Brooks Boston Road provides better cushioning than any other shoe on every stride he takes through DMX technology.

• Tag-line:Tag-line: Enjoy the sunrise in complete comfort.

Whom does Marc believe?

Positioning: New Balance

• Positioning Statement:Positioning Statement: For Suzanne, the working professional, New Balance shoes let you leave behind the daily office grind and discover the natural, simple beauty in life.

• Tag-line:Tag-line: Your computer has a key labeled “escape.” Does your life have one too?

Positioning: Common Errors

• UnderpositioningUnderpositioningCustomers cannot sense the difference.

• OverpositioningOverpositioningOur offer projects too narrow an image.

• Confusing PositioningConfusing PositioningWe make too many claims, or keep changing the

claims over time.

• Doubtful PositioningDoubtful PositioningConsumers find our claims hard to believe.

Thank you!

Now, how about a little Pizza!

Contadina!