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WPS Management Workshop - Business Segmentation WPS Management Workshop - Business Segmentation Presentation Transcript

  • Strategically Branding A Destination William D. Neal Senior Executive Officer SDR, Inc.
  • What Values Come to Mind?
    • Coca Cola
  • What Values Come to Mind?
    • Hewlett Packard
  • What Values Come to Mind?
    • Honda
  • What Values Come to Mind?
    • Disney
  • What Values Come to Mind?
    • Las Vegas
  • Branding is a Strategy
    • Great brands are built strategically
    • Great Brands are a central element of strategic business planning.
    • Great Brands dominate the market planning process.
    • Strategy - integrated actions in the pursuit of competitive advantage
    • George Day
  • Strategic Market Planning
    • A planning process to develop or improve sustainable competitive advantage.
  • “ If it moves, we sponsor it, if it doesn’t move, we paint it red.” Roberto C. Goizueta, Coca Cola
  • Can we adopt strategic business planning models to the Travel & Tourism Industry? Yes ! But we must change our thinking a bit
  • Think in terms of BUSINESS
    • The location can be thought of as the ENTERPRISE.
      • ORLANDO
    • Individual destinations can be thought of as STRATEGIC BUSINESS UNITS dominated by Brands.
      • Disney World
      • Universal Studios
      • Sea World
    • Specific activities can be thought of as CUSTOMER REQUIREMENTS.
      • Rides & Attractions - History Education
      • Culture/Heritage - Nature
      • Night Life - Educational Programs
  • Think in terms of BRANDS
    • The destination area can be thought as an AUTHORITY BRAND .
      • ORLANDO
    • Individual destinations can be thought of as STRATEGIC BRANDS .
      • Disney World
      • Universal Studios
      • Sea World
    • Specific activities can be thought of as INDIVIDUAL BRANDS to meet customer needs.
      • Indiana Jones Theme Park - Theme Hotels
      • Old Town Orlando - Nature Island
  • The Brand Hierarchy Authority Brand Strategic Brand Strategic Brand Strategic Brand Sub- Brand Sub- Brand Sub- Brand Orlando Indiv. Rides Attractions Theme Hotels Disney Universal Sea World
  • San Antonio What Master Brands come to mind for this Authority Brand? The Riverwalk The Alamo The Five Missions Texas Museum of History The Spurs
  • Atlanta What Master Brands come to mind for this Authority Brand? The Braves & Turner Field Stone Mountain Park Buckhead Emory Medical Center Lake Lanier
  • Ocracoke Island? What Master Brands come to mind for this Authority Brand? Where is Ocracoke?
  • CONSUMER Marketing Activities Marketing Mix Other Co. Activities Finance, Production, Legal External Environment Economic, Political, Technological, Social, Demographic The Marketing Concept
  • The Marketing Concept
    • The purpose of business is satisfied customers
      • Drucker, Levitt, McKitterick
    • The purpose of business is to deliver value
      • Porter, Reichheld, Berry
  • All Products & Services in the Category Brand Value Concept The rational buyer purchases the brand with the highest value to them Satisfaction simply keeps you in the Consideration Set Consideration Set Brand Hierarchy * Brand V * Brand X * Brand Z
  • The Marketing Concept
    • REALITY:
    • Marketing Concept must also address the competition
    • The purpose of business is to deliver higher relative value.
    • To survive and grow, you must provide: SUSTAINABLE COMPETITIVE ADVANTAGE
  • Goal of Marketing Strategy Develop Sustainable Competitive Advantage
  • Strategic Market Planning
    • A planning process to develop or improve sustainable competitive advantage. (Neal, “Introduction to Marketing Strategy”)
  • The Kotler Model* Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Product & Market Levels: The Market PlanningProcess Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Corporate & Divisional Levels: Strategic Planning Process * Philip Kotler Business Magazine May-June 1980, pp3 Modified by W.D. Neal 30 April, 1986 Execution Environment Information Macro-environment Publics Competitors Marketing Channels Markets Target Markets Customers Market Segmentation Product Positioning Prod. Optimization Market Forecasting Customer Satisfaction Brand Value
  • The Major Elements of the Strategic Planning Process at the Enterprise Level
    • Mission
    • Goals & Objectives
    • Growth Strategy
    • Business Portfolio Plan
  • Mission
    • Short statement of the business you are in
    • Used to focus and limit your purview
    • Often the hardest step in the process
    • Often accompanied with a VISION STATEMENT - what do I want to be in the future.
  • Goals & Objectives
    • Goals - longer term, broader outcomes you are seeking (e.g. lead the industry in sales and service)
    • Objectives - shorter term, totally measurable outcomes (e.g. sustain a 10% increase in annual profitability for each of the next three years)
    • Each goal should have multiple, time-phased objectives crafted so that their accomplishment will fulfill the goal.
  • Growth Strategy
    • To grow by how much over what time period.
    • How will we measure growth - sales, profits, share, operating ratios, etc.
    • How will we grow?
      • Higher Demand
      • New products
      • Market expansion
      • New market penetration
      • Production efficiency
      • Acquisition
      • etc.
  • Business Portfolio Plan
    • What elements of my business will I put under the same management group?
      • By brand family
      • By product line
      • By geographic/country location
      • By channel
      • By buyer benefits delivered
      • etc.
  • Developing The Strategic Marketing Plan
  • Step 1 - Assessment
    • SWOT Analysis
      • Strengths
      • Weaknesses
      • Opportunities
      • Threats
    • Areas to Address
      • Internal Opns
      • Competitors
      • Markets
      • Marketing
      • Environment
      • Core knowledge
      • Experience
  • The Kotler Strategic Planning Model The Company The Environment Market Segmentation Product Positioning Product Optimization Market Forecasting Corporate & Divisional Levels: Strategic Planning Process Product & Market Levels: The Marketing Process Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Macro-environment Publics Competitors Marketing Channels Markets Target Markets Information Execution Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Philip Kotler Business Magazine May-June, 1980, pg..3 Customer Feedback Customers Brand Value
  • Step 2 - Marketing Opportunity Analysis
    • Segment the market - What bases?
      • Needs/preferences
      • Values/benefits sought
      • Occasions
      • Demographics
    • Align your strengths against competition’s weaknesses - BY SEGMENT
      • Share of market, Share of preference,
      • Channel control, Price advantage, Brand strength,
      • Price/value perception, Production capability, etc
  • Market Segmentation
    • Firms that properly segment their market and focus their resources on deep penetration of targeted segments almost always exhibit higher profitability.
  • Why is Market Segmentation usually successful?
    • Focuses the resources of the firm on a specific target of similar customers.
    • Limits competitive pressure.
    • Allows the firm to develop a deep marketing-mix experience with the segment.
    • Provides a platform for expansion into contiguous segments.
  • Demographics (Life Stage) Occasions The Multi-Dimensional Segmentation Model Activities
  • The Kotler Strategic Planning Model The Company The Environment Market Segmentation Product Positioning Product Optimization Market Forecasting Corporate & Divisional Levels: Strategic Planning Process Product & Market Levels: The Marketing Process Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Macro-environment Publics Competitors Marketing Channels Markets Target Markets Information Execution Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Philip Kotler Business Magazine May-June, 1980, pg..3 Customer Feedback Customers Brand Value
  • Step 3 - Target Market Selection
    • Evaluate segments in terms of your perceived strengths and weaknesses vs competitions’ -develop perceptual maps for segment groups
    • First, select segments you currently dominate and determine how to defend and improve your position
    • Next, select segments that you could dominate and prioritize by cost of domination.
  • Step 3 - Target Market Selection (cont.)
    • Finally, find any remaining segments that represent high growth potential and look at ways you could successfully enter those segments.
      • New product introduction
      • New brand platform
      • Power promotion
    • Order segments by financial attractiveness and prioritize investments
  • The Kotler Strategic Planning Model The Company The Environment Market Segmentation Product Positioning Product Optimization Market Forecasting Corporate & Divisional Levels: Strategic Planning Process Product & Market Levels: The Marketing Process Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Macro-environment Publics Competitors Marketing Channels Markets Target Markets Information Execution Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Philip Kotler Business Magazine May-June, 1980, pg..3 Customer Feedback Customers Brand Value
  • Step 4 - Marketing Mix Strategy
    • FOR EACH TARGETED MARKET …
    • Determine how you will optimize VALUE for each target market, now and in the future
    • Plan the product/service attributes you will emphasize
    • Plan your advertising/promotional support program
    • Plan your channel/delivery strategy - avoid channel conflict
    • Plan your pricing strategy
  • Step 4 - Marketing Mix Strategy (cont.)
    • FOR EACH TARGETED MARKET …
    • Develop contingency plans for likely competitor counter-attacks
    • For each segment, determine how you will enhance your brand equity
    • Use market simulation (preference or choice models) to test likely market response to your initiatives and to test competitive responses
    • Check for incompatible brand and product positions across targeted segments
  • The Kotler Strategic Planning Model The Company The Environment Market Segmentation Product Positioning Product Optimization Market Forecasting Corporate & Divisional Levels: Strategic Planning Process Product & Market Levels: The Marketing Process Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Macro-environment Publics Competitors Marketing Channels Markets Target Markets Information Execution Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Philip Kotler Business Magazine May-June, 1980, pg..3 Customer Feedback Customers Brand Value
  • Step 5 - Marketing Systems
    • Forecast the growth in each targeted segment
    • Develop selling and delivery systems that will support the current market and can handle the forecasted growth.
      • Market information systems
      • Customer service operations
      • Communications programs
    • Develop a customer feedback system that measures plan vs. actual
  • The Kotler Strategic Planning Model The Company The Environment Market Segmentation Product Positioning Product Optimization Market Forecasting Corporate & Divisional Levels: Strategic Planning Process Product & Market Levels: The Marketing Process Company Mission Objectives and Goals Growth Strategy Business Portfolio Plan Macro-environment Publics Competitors Marketing Channels Markets Target Markets Information Execution Marketing Opportunity Analysis Target Market Selection Marketing Mix Strategy Marketing Systems Development Philip Kotler Business Magazine May-June, 1980, pg..3 Customer Feedback Customers Brand Value
  • Strategic Planning
    • Strategic market planning is non-linear and recursive (and sometimes chaotic)
    • The interface between the overall business strategy and the strategic marketing plan is critical - they must be fully integrated
    • Ultimately, the strategic business plan dictates the amount of investment you can afford in your marketing plan
    • Develop a plan to measure costs, effectiveness, and progress to objectives - ROMI
  • Winning Strategy - Maximize value which maximizes loyalty for each target market
    • The KEY to customer LOYALTY and growth is to:
      • Get into the consideration set
      • Then, consistently deliver the BEST VALUE to the targeted customers.
    • VALUE is the KEY DRIVER of choice, thus LOYALTY!
    • Brand Equity should be a major element of the VALUE PROPOSITION.
  • Why is Brand Equity Important?
    • Prevents commoditization of the category.
    • Communicates added value beyond the tangible product performance characteristics, improving selling price and margins.
    • Provides a strong defense against low price generic brands.
    • Provides a platform for new product introductions.
    • Gives more channel control to the manufacturer/producer.
    • Improves stockholder value and stock price.
  • Competing Theories of Brand Equity
    • Financial Orientation
      • Interbrand - Premium over category avg.
      • Accepted Accounting Procedures
      • Farquar - New Accounting Procedure
    • Market Orientation
      • Total Research - Equitrend
      • Landor Associates
      • Aaker
      • Young & Rubican
      • CDB Research
      • Vanderbilt/SDR (Srinivasan, Russell, Kamakura)
  • MARKETPLACE APPROACH TO BRAND EQUITY
  • Competing Market Theories of Brand Equity
    • Aaker- Building Strong Brands . Views brand equity as the total value of a brand, including price premium, satisfaction, product attributes, image attributes, public opinion, and so forth.
    • Vanderbilt Model - ( MSI Series on Brand Equity. ) (Srinivasan, Russell, Kamakura) Views brand equity as just the imagery that surrounds the brand name by buyers in the product category. Brand equity is separate from price and product performance attributes and may be measured as a price differential.
  • Aaker’s 10 Measures
    • Loyalty Measures
      • Price Premium
      • Satisfaction/Loyalty
    • Perceived Quality/Leadership Measures
      • Perceived Quality
      • Leadership/Popularity
    • Associations/Differentiation Measures
      • Perceived value
      • Brand Personality
      • Organizational Associations
  • Aaker’s 10 Measures (cont.)
    • Awareness Measures
      • Brand Awareness
    • Market Behavior Measures
      • Market Share
      • Market Price & Distribution Coverage
    • “ The price premium may be the best single measure of brand equity available, because it directly captures the loyalty of customers in a most relevant way.” Aaker, pg 321.
  • Aaker’s 10 Measures (cont.)
    • Aaker model uses very disparate measures for each of the 10 criteria.
    • Uses judgement to weight measures, depending on the product category, in order to construct a single summary measure.
    • Does not work cross-culturally because of measurement and scaling issues.
    • Gives no examples
    • Ultimately, it is totally judgmental.
  • BRAND VALUE Vanderbilt/SDR Model (Combines market orientation and financial orientation)
  • The Brand Value Model
    • Idea developed from literature of Srinivasan, Russell & Kamakura
    • Very similar model described by Srinivasan & Park (JMR, May 94) (used expectancy-value measurement model)
    • SDR’s approach uses tradeoff exercises combined with other measurements.
  • Brand Value Concept
    • 1. Buyers who are considering a purchase, scan their product/service options and develop a consideration set .
    • 2. Within the consideration set, they develop a hierarchy of brands/products based on their assessment of VALUE .
    • 3. Typically, they choose the brand or product at the top of their value hierarchy , if available.
    • THIS MAY BE A CONSCIENCE COGNITIVE PROCESS, OR A SUB-CONSCIENCE PROCESS WITH SOME EMOTIONAL ELEMENTS
  • The All Products/services in the Category Consideration Set Brand Hierarchy * Brand V * Brand X * Brand Z Brand Value Concept The rational buyer purchases the brand with the highest value
  • How Brands Get Into the Consideration Set
    • Awareness
    • Satisfaction in previous experience, or reputation for high satisfaction of customers
    • Trusted
    • Compatible image with purchaser
    • Perceived acceptable price range
    • Not socially irresponsible
    • Acceptable country of origin
  • Brand Value Concept
    • Elements of Brand Value:
    • - A BUNDLE of tangible attributes delivered by the product/service or its channel.
    • - A BUNDLE of intangible attributes delivered by the name of the brand or producer (brand image or brand equity .)
    • - The price of those combined bundles.
  • Brand Value Concept
    • Customers determine brand value
    • Varies by customer and customer segment
    • Varies by product/service category
    • Any one Customer may have a different value set for different product categories
  • Value Brand Value Model What Drives Value ?
  • Value Price Brand Value Model Price is one element Price includes: - Initial Costs - Operating Costs Initial Price Operating Cost
  • Value Price Product/Service Deliverables Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model The bundle of tangible product/ service attributes is another. Product Performance Service/Channel Performance
  • Value Price Product/Service Deliverables Co./Brand Equity Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model Brand equity is the third element. Attribute 1 Attribute 2
  • Value Price Product/Service Deliverables Co./Brand Equity Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model W Price W i W iAttributes W brand W i W i W i W i W i W i W i Each element of the brand value model has a weight W i W i Attribute 1 Attribute 2 etc..
  • Value Price Product/Service Deliverables Co./Brand Equity Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model W i W i W i W i W i W i W i W i Each buyer has a different weight structure W i Attribute 1 Attribute 2 etc.. W i W Price W iAttributes W brand
  • Value Price Product/Service Deliverables Co./Brand Equity Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model W i W i W i W i W i W i W i W i The buyer’s weight structure is their Value Equation W i W i Attribute 1 Attribute 2 etc.. W Price W iAttributes W brand
  • Brand Value Model
    • Each buyer has a unique Value Equation
    • The Value Equation provides the buyer with a preference structure for making a CHOICE among a competing set of products or services in a category.
    • Rational buyers choose the best VALUE .
    • Thus VALUE drives CHOICE .
  • Value Price Product/Service Deliverables Co./Brand Equity Choice Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model W Price W i W iAttributes W brand W i W i W i W i W i W i W i W i W i Attribute 1 Attribute 2 etc..
  • Brand Value Management
    • BRAND VALUE
    • Varies by product/service category.
    • Price and performance features can often be met by competitors.
    • Brand equity is more difficult to change - long term strategy - Both offensive and defensive.
    • When there is weak brand equity and product/ channel parity in a category, price is the only remaining marketing variable.
  • Brand Equity Characteristics
    • BRAND EQUITY
    • Intangible, varies by category
    • Not easily duplicated, thus provides long- term defense against competition
    • Underlying drivers are perceptual:
      • Image imparted to the purchaser
      • Trust
      • Longevity in the marketplace
      • Reputation for quality
      • Community involvement
    • Built and improved by effective advertising
  • Brand Value/Equity Measurement
    • ASSUMPTIONS
    • Buyers optimize value within a product or service category.
    • Buyers therefore assign utilities (weights) to price, performance attributes, and brand equity.
    • Buyers trade off performance attributes and brand equity against price in order to optimize value.
    • The utilities (weights) of price, performance attributes and brand equity is summative and equal to total brand value.
  • Brand Value/Equity Measurement
    • First, we use conjoint models to estimate utilities.
    • Respondent goes through two tradeoff tasks
    • TASK 1 - Brand-Price tradeoff
    • TASK 2 - Brand-Features-Price tradeoff
    • Merge results of both tasks at the respondent subgroup level and re-scale to be comparable.
    • Purpose is to get accurate estimate of price utility
  • Measurement Model Total Value (U t ) Price (U pr ) Product (U pt ) Attribute 1 (u 1 ) Attribute 2 (u 2 ) Attribute J (u j ) Brand (U b ) … First stage conjoint Second stage conjoint Price X
  • Task 3 - Choice Task
    • Respondent then goes through a CHOICE TASK that is based on their conjoint results.
    • Respondent is asked if they would switch to, or purchase next, their highest rated conjoint profile.
    • IF YES, we ask about another (lower) profile, and so on until they would not purchase or switch.
    • PURPOSE: measure barriers to switching and confirm conjoint results
  • Task 4 - Brand Image Ratings
    • Each brand in the competitive set is also rated (0-10 scale) on its imagery, for example:
      • A brand I can trust
      • A brand that I want seen in my home
      • A company that will fix any problems I may have with their product
      • etc.
    • Ratings are then (ridge) regressed against derived brand equity from the conjoint to get the relative weight of each image driver.
  • Task 4 - Brand Image Ratings
    • The beta coefficients from the ridge regression (or similar models) reveal the key drivers that are most associated with each brand’s utility (derived brand equity)
    • Thus, you can reveal the key drivers of brand equity, improve your imagery on those attributes and improve brand equity
  • Brand Equity DRIVERS – Service Co.
    • Honest in its dealings with customers
    • Concerned about my family’s needs
    • Progressive and innovative
    • Respects me as a customer
    • Is well managed
    • Efficient in coordinating the service activities of different departments
    • Keeps me informed of energy matters that are important to my family’s health
    • Easy to do business with
    • Contributes to the community
  • Average Importance of the Elements of Brand Value
  • Brand Valuation RESULTS
    • With this type of model, you can build a market response simulator to determine how each marketing mix variable effects share of choice.
    • Changes in BRAND EQUITY can be tracked over time.
    • Changes are relative to other products/ brands in the category.
  • Value Price Product/Service Deliverables Co./Brand Equity Choice Image Driver 1 Image Driver 2 Image Driver 3 etc.. Attribute 1 Attribute 2 Attribute 3 etc.. Brand Value Model W Price W i W iAttributes W brand W i W i W i W i W i W i W i W i W i Attribute 1 Attribute 2 etc..
  • Winning Strategy - Maximize value which maximizes loyalty for each target market
    • The KEY to customer LOYALTY and growth is to consistently deliver the BEST VALUE to the customer.
    • VALUE is the KEY DRIVER of choice, thus LOYALTY!
    • Brand Equity can be a major element of the VALUE PROPOSITION.
  • Market Segmentation Based on the Value Model
    • Derive the value equation for each respondent in the survey.
    • Each buyer’s value equation can be used as the basis for segmenting the market.
    • Form groups of respondents who have similar value structures (e.g. price sensitives, service sensitive groups, product performance sensitive groups, etc.)
  • Brand Value Model
    • Each buyer has a unique value equation .
    • We use modified conjoint/choice exercises to determine that value equation for each respondent.
    • From the derived utilities and choice information, we can determine each respondent’s switching behavior under different competitive scenarios.
  • From the Brand Value Model
    • We can determined who switched.
    • We can determine why they switched.
    • We can describe the switchers.
    • We can describe the non-switchers.
    • FOR EACH COMPETITIVE SCENARIO
  • This led us to a discovery!
    • There are different kinds of loyalty!
    • Some people are loyal because they are committed to a brand or company.
    • Some are loyal because a particular brand offers some unique benefits or performance characteristics.
    • Some are loyal because they won’t spend the time or effort to make an evaluation.
    • Some are loyal because they have little choice.
    • And some are just disloyal, buying on price or convenience alone.
  • Some Parting Thoughts
    • A label is not a Brand!
    • Advertising and Promotion costs to support a brand is an investment, not an expense.
    • The starting point, and the KEY to building Brand Equity, is to define what you want your brand to stand for - the implied contract you have with the consumer.
    • Then, support that brand image in every way - in all selling materials, with distributors & retailers, in advertising, promotion, and PR.
  • Some Parting Thoughts
    • You can stake out a brand promise in many ways:
      • The highest quality in the category
      • Good & Economical
      • Available everywhere - systems, parts and repair
      • The best designs in the business
      • Extreme versatility/diversity
    • Make sure your performance (and your channels’ performance) backs up your promise - walk the talk!
  • Some Parting Thoughts
    • Strong brands mitigate channel dominance and product commoditization.
    • Strong brands pull product through the channel.
    • Strong brands improve profit margins.
    • Strong brands build stockholder equity.
    • If you do not build strong brands in your category, someone will do it to you!
  • Questions and Comments [email_address]