Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

Strategic Market Segmentation Chapter 3 Strategic Market Segmentation

Strategic market segmentation (1) Levels and types of market segmentation

Levels and types of market segmentation Vision Strategic intent Product benefits Strategic Segmentation Resource allocation Alignment Planning Managerial Segmentation Marketing programs - Advertising - Sales - Distribution Operational Segmentation

Best Buy segmentation strategy Jill’s - “soccer moms” Barry’s - wealthy professionals Buzz’s - “tech enthusiasts” Ray’s - the family man Mr Storefront - the small business customer Carrie’s - young, single females Helen and Charlie’s - older couples whose children have left home

From Mass Markets to Micro Markets OLD NEW CONSUMERS Passively receive Empowered media users whatever TV control and shape content networks thanks to TiVo, iPod and broadcast Internet ASPIRATIONS To keep up with To standout from the the crowd crowd TV CHOICE Three networks Hundreds of channels plus maybe a plus video on demand PBS station MAGAZINES Age of the big Age of the special interest glossies: Time, magazine for every age Life, Newsweek and affinity group ADS Everyone hums Talking to a group of the Alka-Seltzer one, ads go ever jingle narrower BRANDS Rise of the big, Niche brands, product ubiquitous brands extensions and mass from Coca-Cola customization mean many to Tide product variations Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

Strategic market segmentation (2) Market-driven strategy and segmentation Market segmentation, value opportunities and new market space Market targeting and strategic positioning

Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

Strategic market segmentation (3) Market-driven strategy and segmentation Market segmentation, value opportunities and new market space Market targeting and strategic positioning Activities and decisions in market segmentation

Market Segmentation Activities and Decisions Market to be Segmented Strategic Analysis of Segments Decide How to Segment Finer Segmentation Strategies Form Segments

Strategic market segmentation (4) Market-driven strategy and segmentation Market segmentation, value opportunities and new market space Market targeting and strategic positioning Activities and decisions in market segmentation Defining the market to be segmented

Product Variant Segmentation Product Type Segmentation Generic Segmentation

Strategic market segmentation (5) Identifying market segments Segmentation variables Characteristics of people and organizations Consumer markets Organizational markets Product use situation segmentation Buyers’ needs and preferences Consumer needs Attitudes Perceptions Purchase behavior

Segmentation Variables Purchase Behavior Characteristics of People/ Organizations Buyers’ Needs/ Preferences Use Situation

Illustrative Segmentation Variables Consumer Markets Industrial/ Organizational Markets Characteristics of people/ organizations Age, gender, income, family size, lifecycle stage, geographic location, lifestyle Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary Use situation Occasion, importance of purchase, prior experience with product, user status Application, purchasing Procedure (new task, modified rebuy, straight rebuy Buyers’ needs/ preferences Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal Performance requirements, brand preferences, desired features, service requirements Purchase behavior Size of purchase, frequency of purchase Volume, frequency of purchase

Strategic market segmentation (6) Forming market segments Requirements for segmentation Response differences Identifiable segments Actionable segments Cost/benefits Stability Approaches to segment identification Customer group identification Forming groups based on response differences

Miller Brewing’s beer brand targets Miller genuine draft - “mainstream sophisticates” Milwaukee’s Best Light - “hardworking men” Pilsner Urquell - “beer afficionados” Miller Icehouse - for “drinking buddies”

Requirements for Segmentation Identifiable segments Response differences Actionable segments Segmentation Requirements Stability over time Favorable cost/benefit

Approaches to Segment Identification CUSTOMER RESPONSE PROFILE IDENTIFIERS OF CUSTOMER GROUPS Use Situation Buyers Needs and Preferences Purchase Behavior and Loyalty Characteristics of People and Organizations

Segment Dimensions for Hotel Lodging Services

Illustrative Example: Gasoline Buyers Higher-income, middle-aged men, drive 25-50000 miles a year… buy premium with a credit card … purchase sandwiches and drinks from the convenience store… will sometimes use carwash Road Warriors 16% of buyers Men and women with moderate to high incomes, loyal to a brand and sometimes a particular station … frequently buy premium, pay in cash True Blues 16% of buyers Upwardly mobile men and women - half under 25 years of age - constantly on the go … drive a lot snack heavily from the convenience store Generation F3 (Fuel, Food & Fast) 27% of buyers Usually housewives who shuttle children around during the day and use whatever gas station is based on town or on route of travel Homebodies 21% of buyers Not loyal to brand or station and rarely buy premium … frequently on tight budgets. Price Shoppers 20% of buyers

Illustrative Consumer Perception Map Expensive GROUP II Brand A Brand E Brand B GROUP V Low Quality High Quality GROUP I GROUP III Brand C Brand D GROUP IV Inexpensive

Strategic market segmentation (7) Finer segmentation strategies Logic Customized offerings Diverse customer base Close customer relationships Micro-segmentation Mass customization Variety-seeking strategy

Strategic market segmentation (8) 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

Strategic Analysis of Market Segments Customer Analysis Financial and Market Attractiveness Competitor Analysis Positioning Analysis

Segmentation “Fit” for Implementation Segment Attractiveness and Internal Compatibility Internal Compatibility High Low Attractive segments that match with company capabilities Attractive segments but with poor match with company capabilities High Market Segment Attractiveness Unattractive segments but with match to company capabilities Unattractive segments that do not match with company capabilities Low