1. P a g e | 1 Marketing Concepts & Overview Market Segmentation & Positioning Dr. Ajay K. Sirsi Schulich School of Business asirsi@schulich.yorku.ca

2. P a g e | 2 Introductions Please tell us –Your name –Organization –Role –Previous experience with Marketing theory and practice –What are your expectations of the marketing and sales module?

3. P a g e | 3 Biography – Dr. Ajay Sirsi Schulich School of Business, Marketing professor Research, writing, teaching (Exec, MBA, BBA) –Marketing: A Roadmap To Success (Pearson) –Marketing Led - Sales Driven (Trafford) –Marketing: Real People, Real Decisions (Pearson) Consulting –Royal Bank –Bayer –International Paper –Purolator –Manulife Financial –TELUS –Farm Credit Canada

4. P a g e | 4 Seminar Objectives Provide you with frameworks and tools to understand marketing strategy Enable you to ask the right questions to design superior marketing strategies Enable you to implement marketing strategies –By thinking about implementation at functional level

5. P a g e | 5 Agenda Why do organizations succeed or fail? What is marketing? –Concepts and overview Fundamentals of market segmentation –Positioning

6. P a g e | 6 Outline Key Challenges Facing Your Organization

7. P a g e | 7 I’m going to show you how, using the power of Marketing, you can …

8. P a g e | 8 Build a brand –Decommoditize your business Attract new customers Satisfy your customers Retain your customers At a lower cost Build a more profitable business –8 – 80% profit improvements

9. P a g e | 9 The Research Is Clear Organizations that succeed do so because –They develop sound marketing strategies –They execute those strategies well –They align different parts of the organization –They are always testing their business models Source: Nohria (2003), Sirsi (2005)

10. P a g e | 10 Key Requirements A Focus on the fundamentals –Strong strategies Marketing Plans Customer value propositions –Solid execution Customer-focused Sales Plans Functional Plans by Operations Source: Nohria (2003), Sirsi (2005)

11. P a g e | 11 Agenda: Day 1 Why do organizations succeed or fail? What is marketing? –Concepts and overview Fundamentals of market segmentation –Positioning

12. P a g e | 12 What is marketing?

13. P a g e | 13 Source: Marketing: A Roadmap to Success by Ajay Sirsi

14. P a g e | 14 What Is The Role of Marketing? Contextualize the market Be the voice of the customer within the organization Educate others Help them develop functional plans Achieve customer focus

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17. P a g e | 17 Source: Marketing: A Roadmap to Success by Ajay Sirsi

18. P a g e | 18 External Analysis Opportunities and Threats Strengths and Weaknesses Key Issues Marketing Strategies and Tactics Key Outcomes

19. P a g e | 19 The Marketing Plan External analysis –markets –segments and customers –competitors Internal analysis –OTSW analysis –Key issues to be addressed next year Key objectives to be achieved Key strategies Key tactics Key outcomes Control of marketing plan

20. P a g e | 20 Opportunities Market is fragmented Customers are seeking a one stop shop Threats Economy has slowed down Customers are price sensitive Strengths We have a strong brand We have a broad suite of offerings Weaknesses We have a high cost structure We don’t have products to serve price sensitive customers Our sales force is not trained on value selling OTSW Analysis

21. P a g e | 21 Market is fragmented Customers are seeking a one stop shop Economy has slowed down Customers are price sensitive We have a strong brand We have a broad suite of offerings We have a high cost structure Our sales force is not trained on value selling Product Development Address customer price sensitivity Sales Training Train sales on value based selling Channel Development Develop lower cost to serve channels Address customer price sensitivity Train sales on value based selling OTSW Analysis Business Implications Key Issues Develop products for value segment Strategies Product Tactics Timing/ Person Cost/Resou rces Metric to Track Impact Modify ABC line Q2 A. Sirsi $55k Finance NPD Units EBIT 50 new customers $2M EBIT Tactics

22. P a g e | 22 In Chapter 4 - I show you how to develop a superior Marketing Plan Appendix 1 has an example of a strong Marketing Plan

23. P a g e | 23 Group Work Pick any two businesses within the same industry Answer these questions: –How do they segment their customers? –How do they use the marketing mix elements (product, price, channel, marketing communications) to differentiate themselves? –Whose strategy is superior? Why?

24. P a g e | 24 Agenda: Day 1 Why do organizations succeed or fail? What is marketing? –Concepts and overview Fundamentals of market segmentation –Positioning

25. P a g e | 25 A business that is not segmenting its customers is leaving money on the table – guaranteed!

26. P a g e | 26 Market Segmentation: Glue that Holds the Business Together Why segment customers? –If you are not segmenting your customers, you are: Treating everyone the same, regardless of needs Wasting resources Trying to be all things to all people Not giving the sales force any direction

27. P a g e | 27 Segmentation Principles A business exists to be profitable –Opposite: focus on volume All customers are not created equal –Customer needs –Cost to serve –Appreciation of value creation –Propensity to pay We cannot be all things to all customers –Choose segments to serve

28. P a g e | 28 Good segmentations identify the groups most worth pursuing -- the underserved, the dissatisfied, and those likely to make a first-time purchase Yankelovich and Meer

29. P a g e | 29 How To Segment No right way Many ways possible simultaneously Demographic approach easy, but not necessarily best Best way to segment markets –Group customers by Needs and value drivers Customer attractiveness

30. P a g e | 30 Sophisticated users of data (want business expertise from AC Nielsen) Are not buying much currently Opportunity - they can be educated to buy more How much time am I spending on these customers? How do they answer customer satisfaction survey? Sophisticated users of data (want business expertise from AC Nielsen) Are buying a lot, need to keep them happy How much time am I spending on these customers? How do they answer customer satisfaction survey? Unsophisticated users of data (only want market share data) Are not buying a lot Am I spending too much time on these customers? How do they answer customer satisfaction survey? Unsophisticated users of data Are buying a lot They will leave unless I work with them How much time am I spending on these customers? How do they answer customer satisfaction survey? < $1m > $1m Sophisticated Unsophisticated

31. P a g e | 31 Gold SilverBronze < $100,000 $100-$500 > $500,000 Gives us all his business Buys from one other competitor Buys from many competitors

32. P a g e | 32 Computer TV Kitchen appliances Doorbell Ceiling fan Electrical panel Home theatre system Security system Intercom Energy monitor Intensity of Interaction HighLow Frequency of Use High Low

33. P a g e | 33 Phase 1 Export Domestic Phase 2 Export Home Builder Domestic Industrial Repair & Remodeling Phase 3 Export Home Builder Domestic Industrial Repair & Remodeling 5 Years DIY Contractor

34. P a g e | 34 Segmentation: End State PremiumPerformanceValue Entertainment Software Manufacturing

35. P a g e | 35 Segmentation: End State PremiumPerformanceValue Entertainment Software Manufacturing Needs Value Drivers

36. P a g e | 36 Customer Needs And Value Drivers PremiumPerformanceValue Entertainment High impact product Willing to pay price premiums User-friendly products May consider price premium if case made Product consistency Will not consider price premiums Software Proactive technical support Willing to pay price premiums Quick turnaround May consider price premium if case is made Basic quality Will not consider price premiums Manufacturing High grade quality Willing to pay price premiums Consistent product quality Very willing to consider price premiums if case is made Diversified product line Competitive on price

37. P a g e | 37 Pivotal Matrix for Marketing – Sales Alignment PremiumPerformanceValue Entertainment Software Manufacturing Value Propositions

38. P a g e | 38 Pivot Matrix: Customer Value Propositions PremiumPerformanceValue Entertainment Grade A product Dedicated TS team Product quality guarantee Dedicated TS team Grade B product Charge for TS Software Grade AA product Inventory management Quick turnaround Ability to do short runs Grade BB product Sales materials Manufacturing Grade A product Custom solutions team Cost containment Security of supply Diversified product line Competitive on price

39. P a g e | 39 Segmentation Pitfalls Always targeting the largest segment Failing to identify and invest in emerging segments Developing segmentation schemes that are not actionable –Over segmenting Targeting too many customers with one offering Forgetting that segments change

40. P a g e | 40 Segmentation Pitfalls Segmenting by product, and not by market Using the same segmentation scheme as competitors Always using the same segmentation approach Relying only on the easiest -- demographics Using complex segmentations -- before trying simple ones Not realizing that segmentation is evolutionary

41. P a g e | 41 Segmentation Checklist 1. Is our segmentation scheme simple? –Will people understand and use it? –Is it too complex? 2. Have we segmented our markets using existing data? –Are we starting small, but starting now? 3. Have we utilized customer needs and attractiveness in our segmentation? –Or, are we relying on demographics? 4. Is our segmentation scheme actionable? –Can we actually implement this?

42. P a g e | 42 Segmentation Checklist 5.Will our segmentation scheme give us a competitive advantage? –Or, is our scheme the same as our competitors’? 6. Do we have mechanisms to evolve our segmentation scheme over time? –Are we developing Marketing, Sales and Functional Plans? 7. Will our segmentation scheme enable us to be better business operators? –Will we work together as one?

43. P a g e | 43 In Chapter 3 - I show you how to segment and target customers

44. P a g e | 44 Your Roadmap to Success