1. Segmenting, Targeting and Positioning
Dr. Dawne Martin
MKTG 550 – Business Marketing
October 4, 2012
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

2. Schedule and Learning Objectives
Tuesday, October 9 – Work in your groups on Project – Due Friday, Oct. 12
Thursday, October 11 – Read Chapter 10
Case Due:
Learning Objectives
Review concepts of segmenting, targeting & positioning
Apply target market selection based on value and the value chain
Identify information needed for segmentation
Apply segmentation evaluation & targeting practices to market opportunities
Review the idea of B2B value propositions from Narus, Anderson and Von Rossum article
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

3. Market Segmentation
Market segments--clusters of firms that are distinct from others in terms of what they need and how they buy
Targeting (Selecting target markets)—
Producing an offering that meets the needs of customers in the segment better than the competitor’s
Reaching segment through communication and distribution channels so that customers realize the superior value offered
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

4. Choosing Segments Marketers choose segments to target by:
Measurability
Accessibility
Substantiality
Actionability
Effective segement
members that are homogeneous within the segment
members as heterogeneous as possible with the members of other segments
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

5. Positioning Relationship of product and marketing activities
In comparison to other segments, participants must demonstrate superior value to consumers
Positioning is in the mind of consumer
Resources are often managed to ensure successful positioning
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

6. Business to Business Segmentation
Common Basis
Product Offered
Buying Behavior
Geographic Region
Size of Account
Size of Company
Technology Used
Industry of Customer
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7. Strategies for Market Segments
Competitive advantage through low cost position
Competitive advantage through differentiated offering
Competitive advantage through providing an exact product to a niche market
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8. Segments and The Value Chain – 2a
Value Enabling
Infrastructure
People Management
Technology Development & Mgt
Resource Acquisition
Value Creating
Input Logistics
Operations
Delivery Logistics
Marketing
Service
Offering
Segment 1 2 3 4 a a b c d
Subgroups with differing needs b c d
Several sub-groups in the market segment due to differing needs
Key elements of value chain
contributing to offering – complicated chain of activities due to complicated offering
Key elements of offering addressing subgroups in the segment – complex offering
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

9. Segments and The Value Chain – 2b
Offering
Segment
Value Enabling
Infrastructure
People Management
Technology Development & Mgt
Resource Acquisition
Value Creating
Input Logistics
Operations
Delivery Logistics
Marketing
Service a 1 2 a b b
Fewer sub-groups in the market segment due to more homogeneous needs
Key elements of value chain
contributing to offering – simpler chain of activities due to simpler offering
Fewer key elements of offering addressing subgroups in the segment
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

10. Analytical Approach to Segmentation
Produces two sets of data:
Determine relative size and growth potential of segments
Determine individual segment needs and buying behavior
North American Industrial classification Code (NAICS) - designed and used by the U.S. government, Canada and Mexico
Visit: for full description.
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

11. North American Industry Classification System (NAICS)11
Agriculture, Forestry, Fishing and Hunting 53
Real Estate and Rental and Leasing 21
Mining, Quarrying, and Oil and Gas Extraction 54
Professional, Scientific, and Technical Services 22
Utilities 55
Management of Companies and Enterprises 23
Construction 56
Administrative and Support and Waste Management and Remediation Services
31-33
Manufacturing 61
Educational Services 42
Wholesale Trade 62
Health Care and Social Assistance
44-45
Retail Trade 71
Arts, Entertainment, and Recreation
48-49
Transportation and Warehousing 72
Accommodation and Food Services 51
Information 81
Other Services (except Public Administration) 52
Finance and Insurance 92
Public Administration
Source:
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

12. Innovation Translation
Look for new customers
Verify existence of segment
Do so by transferring technology offering of the first customer to other customers
Involves exploratory interaction with current and prospective customers
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

13. Factors in Assessing Segment Attractiveness
Size of segment
Likely value contribution by channel(s)
Growth rate of segment
Match between segment needs and supplier’s strengths
Intensity of unmet need(s)
Reach ability of segment through communications channels
Differentiability of supplier’s offering
Opportunity to achieve strategic goal by addressing segment
Readiness of segment to seek and adopt a solution
Likelihood of competitive intensity
Opportunity to achieve learning goal by addressing segment
Sufficiency of channel reach
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

14. Logical Analysis of Market Segments
Setting Goals
Achieving sales level, growing at a desirable rate, and other tangible goals
Defining Segments
Measures that reflect differences in need
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

15. Segment Attractiveness for Hypothetical Example
Attributes
Segments
Scores on 5-point scale*
Segment 1: Major Turnaround
Segment 2: Stopping Deterioration
Segment 3: Competitive Improvement
Segment 4: Specific Area Improvement
Potential size year 2010 (in $million) 2
$195.0 3
$390.0 4
$585.0
$975.0
Growth, percent increase by 2012
100% 1
50% 5
150%
Need strength
3.5
(High variance)
Competitive strength
Channel reach
Communications reach
Capability fit
Price sensitivity
Overall attractiveness
(sum of attribute scores) 27 31
30.5
29.5
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16. Technology Adoption Life Cycle (TALC)
Technophiles
Visionaries
Laggards
Time
Sales from New Adopters/period
Pragmatists
Conservatives
Also shown as Exhibit 2-6
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17. Technology Adoption Life Cycle: Adopter Categories
Technophiles—try out the latest and greatest technology; do not need fully developed offering
Visionaries—see competitive advantage by using technology; standardized buying with custom offering
Pragmatists—want same as visionaries but will not buy unless technology is easily adopted with minimal difficulty
Conservatives—only buy when it doesn’t cost to adopt; need to be convinced that the offering is exact for needs
Laggards—will avoid adoption of technology at all costs
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

18. Technology Adoption Life Cycle: Adopter Category Position and Targeting
Technophiles—needs are curiosity; target early
Visionaries—gain competitive edge and will pay for it; target for support
Pragmatists—keep up with cutting edge; use innovation translation
Conservatives—need new technology to keep up to standards
Laggards—unique needs met by old technology
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

19. Product Line Positioning
Goal is to get members of the different segments to see and value both the differences and similarities
Relate to the overall corporate brand positioning
A flagship product may be desired
Position consistent with McKenna’s idea of market ownership
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

20. Customer Value Propositions
Statement of the benefits the customer will derive from a product/service
How value propositions are used:
Positioning relative to competitors
Advertising
Method of focusing on what offerings are really worth to customers
Anderson, Narus, van Rossum, “Customer Value Propositions in Business Marketing, HBR, March 2006

21. Building Value Propositions
Types of Value Propositions
All benefits : all benefits received
Favorable Points of Difference: all favorable points of difference value to competitor
Resonating Focus: One or two points of difference whose improvement will deliver greatest value to customer
Building Blocks of Value Propositions
Points of Parity
Points of Difference
Points of Contention

22. Identifying and Demonstrating Customer Value
Customer value analysis and “Value word equations” using industry terminology
Power reductions cost savings = kW spent X no. of operating hours/yr X no. of years of operation – Rockwell Automation
Demostrate Customer Value ---Value Case Histories – IBM Success Stories
Document Customer Value - GE

23. B2B E-Commerce in China: Alibaba.com
What are the external influences affecting Alibaba and B2B ecommerce in China?
What is the focus of Alibaba’s business what makes it so different from some US ecommerce companies?
Would Alibaba have been as successful today without the leadership of someone like Jack Ma?
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall

24. E-Commerce in China
What are the benefits of the strategic cooperation with China Post?
What are the current and future benefits of the cooperation with Yahoo?
Is there room for Alibaba in the global race for online supremacy and what would you do to secure the future for the company?
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall