1. PIE (AIT)1 Principle of Innovation and Entrepreneurship Charatpong Chotigavanich charatc@alum.mit.edu

2. PIE (AIT)2 Today… Crash course in marketing –STP Based on Marketing class from UCLA Anderson

3. STP Segmentation, Targeting, Positioning “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself, but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy or yourself, you will succumb in every battle.” --Sun Tsu, The Art of War, 500 B.C. PIE (AIT)3

4. STP PIE (AIT)4 Target Position Competitors Market S1 S2 S3 S4

5. Segmentation of the Market Market segmentation is the process of dividing the market (consumers) into identifiable groups based on similarities and differences as they relate to our product/product class. PIE (AIT)5

6. Effective Market Segmentation PIE (AIT)6 Segments should be.... Distinct » Homogeneous within groups » Different across groups Actionable » Useful for identifying customers and deciding marketing mix variables Substantial » Big enough to be profitable Little overlap

7. Primary Segmentation Variables PIE (AIT)7 Descriptors “Who” Bases “Why” Behaviors “What” Age Income/ Education Profession Media Habits Industry Size Location Org. structure Needs Preferences Decision processes Lifestyles Strategic importance Usage Loyalty Deal proneness Responsiveness to marketing mix

8. Variables to Segment the Market: Who Example PIE (AIT)8 Staples Staples Retail Stores –Businesses with 10 or fewer employees –Self-employed home office workers Staples Direct –Small to medium-sized enterprises of 5 to 50 employees Staples National –Corporate procurement departments –Average revenue per account over $1 million

9. Why Example: VALS2 Lifestyles PIE (AIT)9

10. Variables to Segment the Market: What Example Volume Behavior Brand loyal, brand switchers, heavy users The heavy user of fast foods “spend as much as $40 a day at fast- food restaurants. He sometimes visits them more than 20 times a month....” -- Ordonex, “Cash Cows: Burger Joints Call Them ‘Heavy Users’ -- but Not to Their Faces,” Wall Street Journal, 1/12/2000. PIE (AIT)10

11. Putting It All Together: Mobil Oil PIE (AIT)11 Taxonomy at the Pump: Mobil’s 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. 16% 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 in 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 base of marketing strategies for years. 20% of buyers

12. Segmentation Profiles Profiles may not contain all types of variables. Nor must all the same classes of variables exist for all segments. Profiles should maximize similarity within a segment and maximize differences between segments. PIE (AIT)12

13. Choosing your Target Market(s) PIE (AIT)13 Target Market Selection Market Opportunities for Profit: Segment Size Growth rate/potential Company “Fit” With Objectives With Competencies With Customer Base With Resources Competitive Intensity Underserved Needs? Competitors’ Strengths

14. Positioning Positioning: The act of framing the company’s image and offer in the target consumers’ minds, so it occupies a distinct and valued place in relation to competitors. PIE (AIT)14

15. Elements of a Positioning Statement Name it and frame it Who is it for? Who is the major competition and what is our point of differentiation? What proof can we offer about our product and/or company? PIE (AIT)15

16. Positioning Statement To customers who are (target summary) Our product offers (state what the product does from the consumers’ point of view) Relative to (competitive alternatives) “For World Wide Web users who enjoy books, Amazon.com is a retail bookseller that provides instant access to over 1.1 million books. Unlike traditional book retailers, Amazon.com provides a combination of extraordinary convenience, low prices, and comprehensive selection.” (Winer, 2000, p. 64) PIE (AIT)16

17. Positioning Strategies By Attribute(Baking soda toothpaste) By Benefit(Effidac “24 hour relief”) By Price/Quality (Nordstrom; K-mart) By Use/Occasion (Tylenol PM) By Product User (Gerber Graduates) With respect to Product Class (7-Up) With respect to Competitor (Avis vs. Hertz) PIE (AIT)17

18. Analyzing Competitors 1. Who are the relevant competitors? 2. What reaction might we expect from our actions in the marketplace? 3. What marketing strategy and tactics best builds a defensible position with our target market, or what marketing strategy and tactics will best counter established competitive defenses? PIE (AIT)18

19. Who are the competitors? PIE (AIT)19 Total Set Awareness Set Consideration Set Choice Set

20. Intensity and Relevance of Competition Varies PIE (AIT)20 Potential Emerging l Potential competitors in l related or emerging markets l (CBS vs. Google) Minor Indirect l Minor = indirect l (CBS vs. HBO) Major Direct l Major competitors compete l directly with firm l (CBS vs. ABC)

21. How does the competitor behave? What is a competitor ABLE to do? What is a competitor WILLING to do? What is a competitor GOING to do? PIE (AIT)21

22. Analyzing the Competition: SWOT PIE (AIT)22 Strengths Weaknesses Opportunities Threats Internal/External Competitors

23. Assessing Strategy: A Value Chain Approach PIE (AIT)23 Inbound Logistics Product Design/ Manufacturing Marketing/ Sales Distribution Service How a company moves materials/sup plies from supplier’s site to site of manufacturer How a company transforms inputs into finished products How a company identifies, targets, reaches, and satisfies customer needs How a company moves finished product through distribution channels to end-customers or users How a company delivers pre- and post-sales service

24. What is a Product? Seller view –a bundle of tangible and intangible attributes designed to provide benefits to the customer Customer view –a bundle of tangible and intangible benefits  We must manage the benefits received and perceived by the customer through the attributes we assemble. PIE (AIT)24

25. Why Introduce New Products? Offensive –Achieve share or profit goals –Opening wedge into customer segment or channel Defensive –Preempt attack –Prevent loss PIE (AIT)25

26. Types of New Products PIE (AIT)26 Newness to the Market LowHigh Newness to the Firm High Low New product lines/ established markets 20% New to the world products 10% Improvements to existing products 26% Cost reductions 11% Additions to existing product lines 26% Repositioning 7%

27. A Cautionary Note... PIE (AIT)27 “An estimated 86% of products introduced last year failed to reach their business objectives...” Wall Street Journal, January 13, 1992 “Only 56% of new products introduced are still on the market 5 years after launch.” Business Week, August 16, 1993

28. New Product Development Process PIE (AIT)28 Idea Generation Idea Screening Product Design Market Testing Market Introduction 35% Rejected 40% Rejected 50% Rejected

29. Idea Sources PIE (AIT)29

30. PIE (AIT)30 Question? Question ?