1. MKTM028 Strategic Marketing
S-T-P
Week 8
Dr Stephen Castle
Dr Elizabeth Kim
Iain Bromley

2. Learning Objectives:
By the end of this session students will:
understand the meaning of segmentation, targeting and positioning (STP)
the value and importance of STP to the organisation, and
the value and importance of STP to the customer

3. Stages in segmentation and positioning
Hooley et al (2012)

4. Customers are People!
No marketplace consists of a mass of homogeneous customers, each having exactly the same characteristics and wanting an identical product.

5. The Marketing Conundrum
In theory, long-term customer satisfaction is the key to marketplace success
BUT - for most practical purposes, we cannot achieve this…….
There are too many customers, too great a variety of needs…….
We’re only one of many suppliers

6. * * * * * * * * * * * 1A 2B B 1 2 B 1A 1 B 1B 3 1 A 3B A 3A 3 A
No Market Segmentation
Complete Segmentation 1A 2B B 1 2 B 1A 1 B 1B 3 1 A 3B A 3A 3 A
Segmentation
by Income
Segmentation
by Age
Segmentation by
Age-income Class

7. Market Segments
A group of customers who respond in a similar way to product/service offerings
A homogeneous group within a heterogeneous whole - putting clear blue water between your groups

8. Breaking the market down into “bite-size” pieces
Market Segmentation
Breaking the market down into “bite-size” pieces
If we can desegregate our customers into identifiable groups, we can create a different offer for each group

9. The Benefits of Segmentation
Better matching of customer needs

10. The Benefits of Segmentation
Better matching of customer needs
it is easier to satisfy a small group of similar customers than a large group of dissimilar customers. We can get to understand our best customers better.

11. The Benefits of Segmentation
Better matching of customer needs
it is easier to satisfy a small group of similar customers than a large group of dissimilar customers. We can get to understand our best customers better.
it is legitimate to say that there are customers who we DO NOT want.

12. The Benefits of Segmentation
Better matching of customer needs
it is easier to satisfy a small group of similar customers than a large group of dissimilar customers. We can get to understand our best customers better.
it is legitimate to say that there are customers who we DO NOT want. The secret of profitability is not to sell a lot, but to sell a specific offering to a specific group and not to waste time or resources on customers who fall outside the target group. Ritson, M., Marketing,

13. The Benefits of Segmentation
Better matching of customer needs
Enhanced prices/profits
Enhanced opportunities for growth
Easier to identify and combat competition
Targeted communications
Market leadership

14. Market Leadership is worth it!
Doyle (1997)
Return on
Investment % 50 40 30 20 10
Absolute
Market
Share %

15. Competitive positioning and market segmentation
Hooley et al (2012)

16. Segmenting Consumer Markets
Geographic
Demographic
Psychographic
Behavioral
Kotler and Keller (2009)

17. Effective Segmentation
Usual textbook bases for segmentation:
Socioeconomic
Demographic
Geodemographic
are easy to use – but wrong!
talking products is wrong!
Segmentation has to be needs/ value based
Malcolm
McDonald

18. Major Segmentation Variables for Business Markets
Demographic
Kotler and Keller (2009)
Operating variable
Purchasing approaches
Situational factors
Personal
characteristics

19. Segmentation Criteria
Identifiable
Homogeneous
Measurable
Actionable/accessible
Substantial
Exclusive
Recognised by
customers
Premium priced
Practicality is the essence of successful segmentation.
To be useful and relevant to a company, market segments must be:

20. Too many - we can’t manage them Too few - no benefits
So - how many segments?
Too many - we can’t manage them
Too few - no benefits
Depending on the complexity of the product, “though database specialists are reluctant to come up with a rule of thumb, the answer appears to lie between 5 and 10……
Statistically speaking, 7 is normally the answer.”
Direct Response, October 2003.

21. Factors affecting market segment attractiveness
Hooley et al (2012)

22. Factors affecting business strength
Hooley et al (2012)

23. So what do we do with our market segments?

24. Market segment attractiveness and organisational resource strength
Hooley et al (2012)

25. Target market selection
Hooley et al (2012)

26. Market Segment Evaluation
Attractiveness of each segment
Profit potential (60%)
Market growth rate (20%)
Market size (10%)
Strength of competition (10%)
Resources and capabilities to meet segment needs
Market share (60%)
Potential for differential advantage (20%)
Potential cost advantages (10%)
Brand image (10%)

27. Evaluating market targets for a hypothetical company
Hooley et al (2012)

28. Preparing to go to Market
Selection of our target segment(s) determines where we will compete.
We now have to decide how we will compete. 5

29. Alternative marketing strategies
Hooley et al (2012)

30. The Market Segment 1 Segment 2 Segment 3 Segment 2 Customer 1
Marketing Mix
Undifferentiated strategy
The Market
Marketing Mix 1
Differentiated strategy
Segment 1
Marketing Mix 2
Segment 2
Marketing Mix 3
Segment 3
Marketing Mix 2
Segment 2
Focused/Concentrated strategy
Marketing Mix 1
Customer 1
Customised strategy
Marketing Mix 2
Marketing Mix 3
Customer 2
Customer 3

31. The Market Segment 1 Segment 2 Segment 3 Segment 2 Customer 1
Marketing Mix
Undifferentiated strategy
The Market
eg comparethemarket.com; Churchill insurance
Marketing Mix 1
Differentiated strategy
eg BMW
Segment 1
Marketing Mix 2
Segment 2
Marketing Mix 3
Segment 3
Marketing Mix 2
Segment 2
Concentrated strategy
eg Kellogg’s Special K
Marketing Mix 1
Customer 1
Customised strategy
Marketing Mix 2
Marketing Mix 3
Customer 2
eg Luxury Yacht Co.
Customer 3

32. Targeting
Micro – marketing
eg Fiat 500
3D Printing

33. Targeting entry level model 1 series middle managers 3 series
senior managers
top managers
young, young minded, singles & couples
well off couples with children
1 series
3 series
5 series
7 series
Z4 sports X5

34. We select our target market segment(s) (“market coverage”)
Positioning
We select our target market segment(s) (“market coverage”)
When we participate in a marketplace, whether we like it or not, our company, our products, our services will acquire a reputation
Customers will rate us, as part of their buying behaviour 6

35. The way a product is defined……….. by customers…………….
Market Positioning
The way a product is defined………..
by customers…………….
against significant attributes……….
relative to competitors.
This constitutes the position our product has in the customer’s mind.
So - how do we assess “position”? 7

36. Competitive Positioning: Skoda
High Quality
“We’ve changed the car -
can you change your mind?”
“It’s a Skoda - honest!”
Skoda, owned by VW
'The manufacturer of
happy drivers'
Low
Price
High
Price
Low Quality 16

37. Sustainable Competitive Advantage
We must differentiate our product in the customer’s mind from that of our competitors
We must give a “reason to buy”.
If we do not differentiate, customers see no advantage from buying from us………
……..and we end up selling a commodity, on price and availability 23

38. Differentiation
“Marketing is about de-commoditising products” Doyle (1997)
If customers see no difference between our product and our competitors’ then they will choose the cheapest and most accessible
We need to create preference for our product. The route to this is branding.

39. Identify possible competitive advantages
Positioning Tasks
Identify possible competitive advantages
Select the critical competitive advantage
Communicate and deliver that advantage 22

40. Positioning risks and errors
Hooley et al (2012)

41. Criteria for differentiation Kotler and Keller (2006)
Important – relevant to customers
Profitable – costs of differentiation more than covered by price charged
Distinctive – inimitable
Superior – greater value
Affordable –
Communicable -

42. The Value Proposition
“A company can only outperform rivals if it can establish a difference that it can preserve.
It must deliver greater value to customers or create comparable value at lower cost, or do both.
The arithmetic of superior profitability then flows: delivering greater value allows a company to charge higher unit prices: greater efficiency results in lower unit costs”
Porter (1996) HBR Nov/Dec 24

43. Positioning High Price Perceptual Map Narrow Product Range Wide
eg supermarkets
Tesco, Sainsbury, Aldi, Lidl, Asda, Morrisons, M&S, Waitrose
Low Price

44. Positioning ATTACKING
Brand
Achieving
Differentiation
Unique-ness
Promotion
Place
Product
Pricing
Hooley et al (2008: 308)

45. Positioning ATTACKING
Sustaining
Competitive
Advantage
Unique, valued product
Uniqueness
Enhanced customer linkage/service
Tight market targets
Brand / company credibility
Corporate social responsibility

46. Positioning ATTACKING
Product People
Price Physical Evidence
Place Process
Promotion
7Ps
4Ps
The Marketing Mix

47. Keys to Successful Positioning
Clarity
Consistency
Successful positioning
Credibility
Competitive- ness
PTO

48. Four Cs model for successful positioning (Jobber 2010)
Clarity: target market, differential advantage Complicated positioning not memorable
BMW the ultimate driving machine
Stella Artois reassuringly expensive
Credibility: in minds of target customer
eg Ford not appropriate for upmarket cars
Consistency: of message
Gillette – the best a man can get
L’Oreal – because you’re worth it
Land Rover Defender – rugged off-road vehicle
Competitiveness : differential advantage should have competitive edge
Hooley p 208: Positioning levels: companies, products and services, brands
Kotler: Criteria for differentiation: Importance; Distinctive and pre-emptive – cannot be imitated/performed better by others; Superior – way to gain benefit; Communicable – and understandable; Affordable – can afford to pay difference; Profitable – can command appropriate price
Positioning statement – memorable, image-enhancing, written summation of product’s desired stature. Jobber and Fahy
Basic positioning options Hooley et al 2008 p556
Low-price Customers: Price sensitive, Standard indifferent; Strategic focus: Internal efficiency; Resource requirements: Effective cost-control systems, Internal information systems, TQM processes
Premium quality Customers: Demanding and discerning, Less price-sensitive Strategic focus: Quality control, Image management Resource requirements: Market sensing capability, Quality control and assurance systems, Company/brand image and reputation
Innovation Customers: Adventurous innovators and early adopters Strategic focus: First to market, Continuous improvement Resource requirements: Market gap identification skills, Creative R&D skills, New product/service development
Superior service Customers: Service-sensitive, Less price-sensitive Strategic focus: Customer relationship management Resource requirements: Attention to service detail, Skilled and motivated staff, Continuous monitoring and feedback
Differentiated Customers: Selected benefit segments Strategic focus: Segment leadership Resource requirements: Market sensing, Creativity in segmentation, Product/service design capabilities
Customised Customers: Individual customers Strategic focus: Tailoring to individual customer requirements Resource requirements: Ability to listen to customer requirements, Customer bonding and relationship building

49. Learning Objectives:
By the end of this session students will:
understand the meaning of segmentation, targeting and positioning (STP)
the value and importance of STP to the organisation, and
the value and importance of STP to the customer