1. Slide 1 Strategic Marketing Management MKTG 485 Week 6 May 3, 2004

2. Slide 2 Segment Analysis Best, Chapter 5 – Segmentation Strategies –Web Depot Assignment Best, Chapter 6 - Competition

3. Slide 3 Segment Analysis Market Size Market Share Price (Margins) Rate of Growth

4. Slide 4 Effects of Growth Rates on Revenue

5. Slide 5 Segmentation Strategies 1.Mass Market Strategy 2.Large Segment Strategy 3.Adjacent Segment Strategy 4.Multisegment Strategy 5.Small Segment Strategy 6.Niche Segment Strategy 7.Mass Customization

6. Slide 6 1. Mass Market Strategy

7. Slide 7 1. Mass Market Strategy Generic value proposition Core customer needs Business’ generic positioning

8. Slide 8 1. Mass Market Strategy Generic value proposition Core customer needs Business’ generic positioning –WalMart – Low Prices. Always –Sears – Where America Shops –MLB – America’s Pastime

9. Slide 9 Wal-Mart Rules America! 2002 Performance –2002 Revenue - $245 billion –2002 Weekly Customers – 138 million in 4,750 stores –82% of American households purchased at least once Success Formula – Cost Minimization with savings passed on to consumers –Low wages – avg $13,861 in 2001 –Buy cheap, sell cheap Leads to Category Domination –32% of all disposable diapers –26% of all toothpaste –20% of all pet food

10. Slide 10 2. Large Segment Strategy

11. Slide 11 2. Large Segment Strategy Focus on Heavy User Competition?

12. Slide 12 2. Large Segment Strategy Focus on Heavy Users –Hertz in Car Rentals Competition? –Enterprise in Home Market

13. Slide 13 3. Adjacent Segment Strategy

14. Slide 14 3. Adjacent Segment Strategy Systematic Entry & Expansion

15. Slide 15 3. Adjacent Segment Strategy Systematic Entry & Expansion

16. Slide 16 3. Adjacent Segment Strategy Systematic Entry & Expansion –Honda’s entry into motorcycle market –Cannon’s entry into photocopier

17. Slide 17 4. MultiSegment Strategy

18. Slide 18 4. MultiSegment Strategy Focus on Less Competitive Segments

19. Slide 19 5. Small Segment Strategy

20. Slide 20 5. Small Segment Strategy Focus on Sophisticated User Focus on Environmentally Concerned

21. Slide 21 6. Niche Segment Strategy

22. Slide 22 6. Niche Segment Strategy Focus on Special Need Users Focus on Status/Luxury

23. Slide 23 7. Mass Customization

24. Slide 24 7. Mass Customization Internet-based Businesses

25. Slide 25 Segmentation Strategies 1.Mass Market Strategy 2.Large Segment Strategy 3.Adjacent Segment Strategy 4.Multisegment Strategy 5.Small Segment Strategy 6.Niche Segment Strategy 7.Mass Customization

26. Slide 26 Segmentation Strategies A B A D G Mass Market Large Segment Adjacent Segment Multi- Segment Small Segment Niche Segment Mass Customization A A

27. Slide 27 Segment Profitability Net Revenue Var. Cost Marketing = Mrkt x Mrkt x per - per - Mktg Contribution Demand Share Cust. Cust. Expenses ( ) = Number of Customers Margins = Mktg Expenses per customer - ( ) x

28. Slide 28

29. Slide 29 Segment Profitability Net = Net Mktg - Fixed Income Contribution Expenses

30. Slide 30 Segment Strategies SegmentCharacteristicsStrategy Good Bad Ugly

31. Slide 31 Industry Forces Market Entry/Exit Buyer/Supplier Power Substitutes/Rivalry

32. Slide 32 Effect on Competition? Industry ForceExampleCounter Strategy Easy to Enter Market Hard to Exit Market Powerful Buyers Powerful Suppliers Many Substitutes Intense Rivalry (excess capacity)

33. Slide 33 Effect on Competition? Industry ForceExampleCounter Strategy Easy to Enter Market Espresso stands Hard to Exit Market Bankrupt airlines

34. Slide 34 Effect on Competition? Industry ForceExampleCounter Strategy Powerful BuyersDell, Gateway (HP printers) Powerful Suppliers Intel Microsoft

35. Slide 35 Effect on Competition? Industry ForceExampleCounter Strategy Many SubstitutesAutomobiles Intense Rivalry (excess capacity) Dell – Compaq – HP – Gateway – Sony

36. Slide 36 Initial State Competitor Self Hold Price Cut Price 5% Hold Price Share – 10% Volume – 1,000,000 Price - $100 Margin - $40 Net Contr. - $40 million Share – 8% Volume – 800,000 Price - $100 Margin - $40 Net Contr. - $32 million Cut Price 5% Share – 12% Volume – 1,200,000 Price - $95 Margin - $35 Net Contr. - $42 million Share – 10% Volume – 1,000,000 Price - $95 Margin - $35 Net Contr. - $35 million

37. Slide 37 Competitive Advantage AdvantageExamplesMethods Cost Dell vs. Compaq Southwest Airlines Wal Mart, Office Depot NBC vs. CBS Quality HP Printers Intel, Microsoft Sony, Toyota Marketing Coca Cola McDonalds

38. Slide 38 Marketing Warfare

39. Slide 39 Basic Assumptions Markets are competitive Competitors are rarely of equal strength Competitive strategy is dictated by one’s relative strength Proper deployment of assets is key to success –I.e., what you do with your assets is as important as the strength of your assets.

40. Slide 40 How Markets Divide Themselves Leader - > 30% share Challenger - 15-30% share Flanker - 5 - 15% share Nichers - 1% or less

41. Slide 41 Leader – Defend Position ApproachExamples Adopt an Aggressive Offense against the competition Microsoft Use resources to increase the cost of competition AT&T Broadband

42. Slide 42 Challenger – Focus on Leader ApproachExamples Attack Leader’s strength but narrowly Pepsi Consider turning leader’s strength into weakness Netscape

43. Slide 43 Flanker – Focus on Overlooked Areas ApproachExamples Segment market to identify unmet needs Chrysler Avoid direct competition with leader and challenger Jack in the Box

44. Slide 44 Nichers/Guerillas – Find areas not attractive to Others ApproachExamples Think smallJolt Subaru Be prepared to quit when competition hits up Hummer Microbrews Snapple