Cenco marketing the future of marketing 3 _ mohan

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  • 8 Notes: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________
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  • Those who must implement the positioning framework need more detailed positioning information that is audience-specific. This is intended to be attached to the preceding general framework.
  • Cenco marketing the future of marketing 3 _ mohan

    1. 1. ©2003 Mohan Sawhney Kellogg School of Management Northwestern University Segmentation and Value Proposition Design
    2. 2. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design
    3. 3. Defining market segmentation <ul><li>Market segmentation is the process of dividing a potential market into meaningfully distinct groups of customers, such that customers within a group (i.e., segment) have similar needs and values, and each group can be identified and offered a different marketing mix plan. </li></ul><ul><li>Market segmentation is a selective demand stimulation strategy, as opposed to a primary demand stimulation strategy. </li></ul>
    4. 4. Why practice segmentation? <ul><li>Customers differ in what they care about, how they decide, where they buy, and how they use products. So a company cannot be “everything to everybody” with the same offering. Market segmentation is a “divide and conquer” strategy that recognizes the differences across customers, and creates focused strategies for each segment. </li></ul><ul><li>Firms that recognize that recognize differences across groups of customers and create segment-specific strategies can deploy marketing resources more effectively and productively. </li></ul><ul><li>Customers are willing to pay more for offerings that exactly meet their needs, and are more loyal to firms that understand and speak to their needs better </li></ul><ul><li>Market segmentation produces increased costs to the firm in the short run. But these increased costs are generally offset by increasing sales in the long run. </li></ul>
    5. 5. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design
    6. 6. Market segmentation approaches <ul><li>Traditional (“A Priori”) Segmentation Approach: </li></ul><ul><ul><li>Start with segments based on identifiable customer/firm characteristics and then work forward to see if these segments have meaningful distinct needs/behavior or if these segments seek different benefits </li></ul></ul><ul><li>Response-based (“Post-Hoc”) Segmentation Approach: </li></ul><ul><ul><li>Start with collecting data on customer buying characteristics to determine distinct groups of customers and then work backwards to see if these groups can be identified in terms of demographic/firmographic characteristics. </li></ul></ul>Who customers are (Identifier variables) What customers want/do (Response Variables) Traditional Approach Response-Based Approach
    7. 7. Post-hoc segmentation <ul><li>Process </li></ul><ul><ul><li>Conduct research on identifying key customer buying characteristics. </li></ul></ul><ul><ul><li>Cluster on those characteristics to find customers who have “similar” needs, care-abouts, and buying behavior. </li></ul></ul><ul><ul><li>Determine the profile of customers belonging to a cluster/segment in terms of their demographics/firmographics such that they can be offered an appropriate marketing-mix plan. </li></ul></ul><ul><li>Rationale </li></ul><ul><ul><ul><li>Customer buying behavior = f (needs, behavior, care-abouts) </li></ul></ul></ul><ul><ul><ul><li>Cluster/segment profile = f (demographics/firmographics) </li></ul></ul></ul><ul><ul><li>Outcomes from “post hoc” approach may become a useful basis for future “a-priori” segmentation </li></ul></ul>
    8. 8. Segmenting the PCS market: Traditional (“A Priori”) Approach Segment Identities First Define Segment Identities Then Search for Response Differences
    9. 9. Response-based approach (Step 1) Use These to Define Benefit Segments First Identify Response Differences Response Segments
    10. 10. Response-based approach (Step 2) Work Backward to Identify Segments Define Response Segments Response Segments
    11. 11. Lenses versus objects: Segmentation variables versus segments <ul><li>Hypothetical segment description: </li></ul><ul><li>White collar executive </li></ul><ul><li>Wide-area roaming </li></ul><ul><li>50% time traveling </li></ul><ul><li>Carries laptop, cell phone </li></ul><ul><li>Poor landline access </li></ul><ul><li>Needs persistent email connectivity </li></ul><ul><li>Not technically savvy </li></ul><ul><li>Tips for segmentation </li></ul><ul><li>Look for good identifier “proxies” </li></ul><ul><li>Search for patterns across variables </li></ul><ul><li>Limit number of segments to 4-6 </li></ul><ul><li>Form multi-dimensional description </li></ul><ul><li>Validate with observational research </li></ul>Applications used Degree of Mobility Contextual factors Devices used Occupation Range of Mobility Road Warrior
    12. 12. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design
    13. 13. Strategic options after segmentation <ul><li>Adapt the core product </li></ul><ul><li>Customize the product without modifying the core </li></ul><ul><li>Reconfigure the services you offer with the product </li></ul><ul><li>Modify the channels you use to go to market </li></ul><ul><li>Modify the pricing approach for the product </li></ul><ul><li>Modify the customer service levels you offer </li></ul><ul><li>Alter perceptions about you or your competitor’s product </li></ul><ul><li>Alter importance weights that customers attach to the various benefits </li></ul><ul><li>Make important benefits “ table stakes ” </li></ul><ul><li>Call attention to neglected or new dimensions </li></ul>
    14. 14. Segmented offerings at Fidelity Segment Planning & guidance Services Trading commission High net worth <ul><li>Personalized and frequent interactions </li></ul><ul><li>Quarterly portfolio reviews </li></ul><ul><li>Dedicated representatives </li></ul>$14.95 Active traders <ul><li>Comprehensive research </li></ul><ul><li>Advanced decision tools </li></ul><ul><li>Special trading software </li></ul><ul><li>Dedicated team </li></ul><ul><li>Deep brokerage experience </li></ul>$14.00 Core customers <ul><li>Annual portfolio review </li></ul><ul><li>Self-guided tools </li></ul><ul><li>Access to pooled reps </li></ul>$29.95 Retirees <ul><li>Retirement income planning </li></ul><ul><li>Retirement consultants </li></ul>$29.95
    15. 15. Segmented service model at Fidelity Access level Customer type Reps to customer ratio Private access > $5mm in assets 116:1 Premium access $500K-$5mm in assets 250:1 Active traders >36 trades/year 440:1 Preferred access $100K-$500K in assets 440:1 Standard access < 100K in assets 1,500:1 “ Penalty box” 9,000 problem customers 900:1
    16. 16. Steps in strategic target marketing Understanding market segmentation Approaches to market segmentation The process of market segmentation Target market selection Putting segmentation into action
    17. 17. Overview of target market selection High Low Strong Weak Company Capabilities Segment Attractiveness Aim : Select segment where company position is strong and market is attractive Company Analysis Customer Analysis Competitor Analysis Industry Analysis Profitability Value Chain Benefit Segments Segment Attractiveness
    18. 18. A template for segment evaluation
    19. 19. Targeting strategies S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 Mass Vertical Horizontal Niche
    20. 20. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design
    21. 21. What is positioning? <ul><li>The position is the place that your offering occupies in your prospects’ minds and hearts on attributes that are important to them, relative to competing alternatives that they may consider. </li></ul><ul><li>Positioning is defined from the customer frame of reference , not the company’s. Positioning is defined relative to competing alternatives, not in absolute terms. </li></ul><ul><li>The objective of positioning is to define a value proposition - the promise you make to specific audiences of prospects to win their minds and hearts. </li></ul>(points of difference)
    22. 22. The positioning statement <ul><li>“ For __________________________” </li></ul><ul><li>(target customers or prospects) </li></ul><ul><li>______________________ provides ______________ </li></ul><ul><li>(your product/service offering) (Key benefits) </li></ul><ul><li>because ____________________________________________. </li></ul><ul><li>(points of differentiation/reasons to believe) </li></ul>(points of difference) (key benefits) (your product/service)
    23. 23. Examples of positioning statements AVIS “ For business people who rent cars , Avis is the company who will provide the best service because the employees own the company .” HOME DEPOT “ For do-it-yourselfers , Home Depot offers the best prices because we are the largest building supply company. ” BODY SHOP “ For people seeking wellness , the Body Shop offers the most natural bath and cosmetic products because we are the most environmentally friendly cosmetics company .” SOUTHWEST AIRLINES “ For short-route travelers , Southwest Airlines offers the best prices with reasonable and dependable service because we operate point-to-point service and don’t charge more for last minute bookings.”
    24. 24. Covering your bases in positioning: The “positioning diamond” What? Definition of offering and benefits For whom? Target customers or prospects Against whom? Competing alternatives Why? Points of differentiation
    25. 25. Dimensions of value in positioning Functional value What the product does Economic value What that means in time and money Emotional value How it makes you feel ACT (BODY) THINK (MIND) FEEL (HEART) <ul><li>Key features and their benefits </li></ul><ul><li>Intended end-uses </li></ul><ul><li>Intended end-users </li></ul><ul><li>Deployment experience </li></ul><ul><li>Usage experience </li></ul><ul><li>Maintenance experience </li></ul><ul><li>Service experience </li></ul><ul><li>TCO (Total Cost of Ownership) </li></ul><ul><li>EVC (Economic Value to Customer) </li></ul><ul><li>Time savings </li></ul><ul><li>Cost savings </li></ul><ul><li>Quality improvements </li></ul><ul><li>Flexibility enhancement </li></ul><ul><li>Value of ownership </li></ul><ul><li>Value of affiliation </li></ul><ul><li>Value of relationship </li></ul><ul><li>Emotional significance </li></ul>
    26. 26. Positioning statements versus value propositions <ul><li>The positioning statement attempts to summarize the key benefits and points of differentiation in a way that addresses the shared values and priorities of multiple audiences and target segments. The positioning statement is like a “platform” or “umbrella” that should be general enough to work for all relevant audiences. </li></ul><ul><li>Value propositions are statements of key benefits offered by the product to specific audiences and specific segments . Value propositions are derived from the positioning statement, but focus on the unique values and priorities of each audience and target segment. </li></ul>
    27. 27. Positioning statements versus value propositions: An example <ul><li>Positioning Statement : The Windows .NET Server operating system is the most productive infrastructure platform for powering connected applications, networks, and Web services from the workgroup to the data center. </li></ul><ul><li>Value Proposition (tailored to the IT Implementer): For IT Implementers , who want to be empowered to control their network infrastructure , Windows .NET Server provides reliable deployment, management, and use of the network infrastructure that allows you to respond faster than you can on any other platform . </li></ul>
    28. 28. Messaging tag lines: The articulation of positioning <ul><li>IBM - “the next utility” </li></ul><ul><li>Nokia – “human technology” </li></ul><ul><li>HP – “invent” </li></ul><ul><li>Hertz – “exactly” </li></ul><ul><li>Compaq – “inspiration technology” </li></ul><ul><li>Accenture – “innovation delivered” </li></ul><ul><li>Ernst & Young – “from thought to finish” </li></ul><ul><li>Lexus – “the exhilarating pursuit of perfection” </li></ul><ul><li>Boeing – “forever new frontiers” </li></ul>
    29. 29. Six tests to evaluate your positioning <ul><li>Relevance test : Do customers care ? Does the positioning get at a strong “pain point”? </li></ul><ul><li>Clarity test : Will customers “ get ” it? Does the positioning express the benefits in a clear and customer-friendly way? It is specific and focused, or ambiguous and vague? Does the positioning lend itself to clear translation into messaging and product strategy decisions? </li></ul><ul><li>Credibility test : Will customers believe it? Can we offer solid support points or evidence to substantiate our positioning? </li></ul><ul><li>Uniqueness test : Is the position unique? Does is set us apart from competition in a meaningful way? It the position already “owned” by a competitor? Is it a “me-too” position? </li></ul><ul><li>Attainability test : Can we get there? Are we making claims that are achievable, or are we selling hopes, dreams and vaporware? </li></ul><ul><li>Sustainability test : Can this position be maintained over time? To what extent will it remain relevant in the future, even as technology and products change? </li></ul>
    30. 30. Summary: A positioning framework Adapted from: Joan Giese Positioning Framework document Product Name: Target Audience: Specific Audience Needs: Functional Benefits: Emotional Benefits: Economic Benefits: Positioning Statement (across audiences): Value Proposition (tailored to this audience): Key Positioning Pillars: (prioritized) Pillar 1 Pillar 2 Etc. Audience 1 Relevance to Customer: Degree of Differentiation: Believability by Customer: Support Points: Proof Points: (attached) Audience 2 Relevance to Customer: Degree of Differentiation: Believability by Customer: Support Points: Proof Points: (attached)

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