1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space

1. Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

2. Chapter 3 Strategic Market Segmentation

3. Strategic market segmentation (1) • Levels and types of market segmentation

4. Levels and types of market segmentation Vision Strategic intent Product benefits Strategic Segmentation Resource allocation Alignment Planning Managerial Segmentation Marketing programs - Advertising - Sales - Distribution Operational Segmentation

5. Best Buy segmentation strategy • Jill’s - “soccer moms” • Barry’s - wealthy professionals • Buzz’s - “tech enthusiasts” • Ray’s - the family man • Mr Storefront - the small business customer • Carrie’s - young, single females • Helen and Charlie’s - older couples whose children have left home

6. From Mass Markets to Micro Markets OLD NEW CONSUMERS Passively receive Empowered media users whatever TV control and shape content networks thanks to TiVo, iPod and broadcast Internet ASPIRATIONS To keep up with To standout from the the crowd crowd TV CHOICE Three networks Hundreds of channels plus maybe a plus video on demand PBS station MAGAZINES Age of the big Age of the special interest glossies: Time, magazine for every age Life, Newsweek and affinity group ADS Everyone hums Talking to a group of the Alka-Seltzer one, ads go ever jingle narrower BRANDS Rise of the big, Niche brands, product ubiquitous brands extensions and mass from Coca-Cola customization mean many to Tide product variations Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

7. Strategic market segmentation (2) • Market-driven strategy and segmentation • Market segmentation, value opportunities and new market space • Market targeting and strategic positioning

8. Segmentation and Market-Driven Strategy SEGMENTS VALUE OPPORTUNITIES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSITIONING STRATEGY

9. Strategic market segmentation (3) • Market-driven strategy and segmentation • Market segmentation, value opportunities and new market space • Market targeting and strategic positioning • Activities and decisions in market segmentation

10. Market Segmentation Activities and Decisions Market to be Segmented Strategic Analysis of Segments Decide How to Segment Finer Segmentation Strategies Form Segments

11. Strategic market segmentation (4) • Market-driven strategy and segmentation • Market segmentation, value opportunities and new market space • Market targeting and strategic positioning • Activities and decisions in market segmentation • Defining the market to be segmented

12. Product Variant Segmentation Product Type Segmentation Generic Segmentation

13. Strategic market segmentation (5) • Identifying market segments • Segmentation variables • Characteristics of people and organizations • Consumer markets • Organizational markets • Product use situation segmentation • Buyers’ needs and preferences • Consumer needs • Attitudes • Perceptions • Purchase behavior

14. Segmentation Variables Purchase Behavior Characteristics of People/ Organizations Buyers’ Needs/ Preferences Use Situation

15. Illustrative Segmentation Variables Consumer Markets Industrial/ Organizational Markets Characteristics of people/ organizations Age, gender, income, family size, lifecycle stage, geographic location, lifestyle Type of industry, size, geographic location, corporate culture, stage of development, producer/ intermediary Occasion, importance of purchase, prior experience with product, user status Use situation Application, purchasing Procedure (new task, modified rebuy, straight rebuy Buyers’ needs/ preferences Brand loyalty status, brand preference, benefits sought, quality, proneness to make a deal Performance requirements, brand preferences, desired features, service requirements Purchase behavior Size of purchase, frequency of purchase Volume, frequency of purchase

16. Strategic market segmentation (6) • Forming market segments • Requirements for segmentation • Response differences • Identifiable segments • Actionable segments • Cost/benefits • Stability • Approaches to segment identification • Customer group identification • Forming groups based on response differences

17. Miller Brewing’s beer brand targets • Miller genuine draft - “mainstream sophisticates” • Milwaukee’s Best Light - “hardworking men” • Pilsner Urquell - “beer afficionados” • Miller Icehouse - for “drinking buddies”

18. Requirements for Segmentation Identifiable segments Response differences Actionable segments Segmentation Requirements Favorable cost/benefit Stability over time

19. Approaches to Segment Identification CUSTOMER RESPONSE PROFILE IDENTIFIERS OF CUSTOMER GROUPS • Use Situation • Buyers Needs • and Preferences • Purchase • Behavior and • Loyalty • Characteristics • of People and • Organizations

20. Segment Dimensions for Hotel Lodging Services

21. Illustrative Example: Gasoline Buyers Higher-income, middle-aged men, drive 25-50000 miles a year… buy premium with a credit card … purchase sandwiches and drinks from the convenience store… will sometimes use carwash Road Warriors 16% of buyers Men and women with moderate to high incomes, loyal to a brand and sometimes a particular station … frequently buy premium, pay in cash True Blues 16% of buyers Upwardly mobile men and women - half under 25 years of age - constantly on the go … drive a lot snack heavily from the convenience store Generation F3 (Fuel, Food & Fast) 27% of buyers Usually housewives who shuttle children around during the day and use whatever gas station is based on town or on route of travel Homebodies 21% of buyers Not loyal to brand or station and rarely buy premium … frequently on tight budgets. Price Shoppers 20% of buyers

22. Illustrative Consumer Perception Map Expensive GROUP II • Brand A • Brand E • Brand B GROUP V High Quality Low Quality GROUP I GROUP III • Brand C • Brand D GROUP IV Inexpensive

23. Strategic market segmentation (7) • Finer segmentation strategies • Logic • Customized offerings • Diverse customer base • Close customer relationships • Finer segmentation strategies • Micro-segmentation • Mass customization • Variety-seeking strategy

24. Strategic market segmentation (8) • Selecting the segmentation strategy • Deciding how to segment • Strategic analysis of market segments • Customer analysis • Competitor analysis • Positioning analysis • Estimating segment attractiveness • Segmentation “fit” and implementation

25. Strategic Analysis of Market Segments Customer Analysis Financial and Market Attractiveness Competitor Analysis Positioning Analysis

26. Segmentation “Fit” for Implementation Segment Attractiveness and Internal Compatibility Internal Compatibility High Low Attractive segments that match with company capabilities Attractive segments but with poor match with company capabilities High Market Segment Attractiveness Unattractive segments but with match to company capabilities Unattractive segments that do not match with company capabilities Low