OLC EUROPE

1. OLC EUROPE MARKTING PRINCIPLES SEGMENTATION TARGETING AND POSITIONING

2. On successful completion of Learning Outcome, you can: show macro and micro environmental factors which influence marketing decisions propose segmentation criteria to be used for products in different markets choose a targeting strategy for a selected product/service demonstrate how buyer behaviour affects marketing activities in different buying situations propose new positioning for a selected product/service Be able to use the concepts of segmentation targeting and positioning

3. Inmarketing planning process, one needs to take a look at the organization's current situation, especially within the context of the mission, higher-level plans and higher-level goals. This is accomplished through environmental scanning and analysis. When learning about the situation inside the organization, marketers use an internal audit, andwhen learning about the situation outside the organization, they use an external audit. All the relevant information is accumulated, evaluated and distilled into a critique reflecting the organization's primary strengths, weaknesses, opportunities and threats, known as the SWOT analysis. ENVIRONMENTAL SCANNING AND ANALYSIS

4. SWOT ANALYSIS – THE PLANNING STAGE BAD NOW Remedy or stop GOOD NOW Maintain & build BAD FUTURE Intercept and counter GOOD FUTURE Prioritize & optimize

5. The purpose of internal marketing audit is to identify the organisation’s strengths and weaknesses • The internal audit covers the mission statement plus the organization's resources and capabilities, current offerings, previous performance, business relationships and key issues. These internal factors, individually and in combination, are instrumental in the way a company fulfils its mission, serves its customers and competes in the marketplace. • A strength is an internal capability or factor that can help the organization achieve its objectives, making the most of opportunities or deflecting threats. • A weakness is an internal capability or factor that may prevent the organization from achieving its objectives or effectively handling opportunities and threats, especially within the competitive context. INTERNAL AUDIT

6. Conducting an internal marketing audit for an organisation will involve the scanning and analysis of five main factors: The organisation's resources and capabilities The organisation’s current offerings The organisation’s previous performance The organisation’s business relationships; and Key issuesaffecting the operations of the organisation One will be looking for information that can help to understand the organization's current situation and the strengths one can rely on when implementing a marketing plan. Analysing the internal environment

7. Core competencies of an organisation refers to the internal capabilities that contribute to competitive superiority yet are not easily duplicated. Such capabilities are traced four main areas: Organization's human resources, Financial resources Informational resources and Supply resources When planning for marketing, Managers must balance the investment and allocation of resources. The organization's values, ethical standards and social responsibility position also affect this balancing act. Organisational resources and capabilities

8. This part of the internal audit involves a review and analysis of the goods and services currently on offer to establish where the organisation stands before making plans to move ahead. • It is also important to understand how the organization's offerings relate to the mission and to resources available. • Companies generally examine the following, looking at historic and current trends: • composition, sales and market share of product mix and lines • customer needs satisfied by features and benefits • product pricing and profitability, contribution to overall performance • product age and position in product life cycle • links to other products. Current offering

9. Although past performance is never a guarantee of future performance, looking at previous results can reveal insights about internal strengths and weaknesses. • The purpose is to build on past marketing experience in planning new marketing activities. At a minimum, the following performance indicators will need to be analysed: • Previous year sales (in units and monetary terms) • Previous year profits and other financial results • Historic trends in sales and profits by product, geographic region, customer segment, etc. • Results of previous marketing plans • Customer acquisition, retention and.loyalty trends and costs. Previous performance

10. Good business relationships can act as strengths, helping organizations make the most of opportunities or defend against threats and profitably satisfy customers. Among the areas of business relationships to be examined during an internal audit are: • value added by suppliers, distributors and strategic alliance partners • internal relationships with other units or divisions • capacity, quality, service, commitment and costs of suppliers and channel members • changes in business relationships over time • level of dependence on suppliers and channel members. • Close connections with internal divisions or channel members and suppliers can be an important competitive advantage Business relationships

11. Questions to answer under key issues include: What specific issues could interfere with the organization's ability to move toward its mission and goals, and what are the warning signs of potential problems? What specific issues are pivotal for organizational success? Finding answers to such questions can help organisations to develop appropriate marketing plans to deal effectively with identified marketing problems to move towards achieving organizational goals Some organizations look at key issues more closely, according to customer segment, market or product. It may be necessary to conduct a marketing research to get a more complete picture of certain issues. Key issues

12. SWOT analysis 2013 Strengths Weaknesses Patent infringement Too low profit margin Main competitors are also largest buyers Lack its own OS and software Focus on too many products • Hardware integration with many open source OS and software • Excellence in engineering and producing hardware parts and consumer electronics • Innovation and design • Focus on environment • Low production costs • Largest share in mobile phones and 2nd place in smartphones sales • Ability to market the brand

14. The purpose of External Audit is to identify opportunities and threats. The external audit covers political-legal, economic, social-cultural and technological factors (known as PEST) plus ecological and competitive factors that may present opportunities or pose threats. An opportunity is an external circumstance or factor that the organization can attempt to exploit for higher performance. A threat is an external circumstance or factor that could inhibit organizational performance, if not addressed. EXTERNAL AUDIT

15. Sources for an external audit include internal information about: • Customers, • Partners and suppliers, • Market share, • Technical standards; • Customer feedback through surveys, complaints and suggestions, • Government, • Academic or syndicated studies of the market, • The industry groups; • Competition; • Employees, • Media and online reports; • Special interest groups. EXTERNAL AUDIT

16. SCOPE OF EXTERNAL AUDIT -

17. Marketers can approach a market through either market aggregation or market segmentation. Market aggregation or mass marketing is where there is little or no subdivision of the market. Even though there is diversity between consumers, they are seen to be sufficiently alike to approach as a homogeneous group when marketing a particular product. Market segmentation is process of dividing a market into homogeneous segments using one or a range of possible alternative segmentation methods, each segment being composed of customers or consumers sharing similar characteristics Market aggregation and market segmentation

18. “Market segmentation is the process of splitting customers into different groups or segments, within which customers with similar characteristics have similar needs. By doing this each one can be targeted and reached with a distinct marketing mix” (McDonald and Dunbar 1995 p10) • This definition has three key tasks for the market: • To define the market and find segments within it • To select the most profitable segment that can served most effectively and efficiently by the company’s resources (Targeting) • To communicate to that segment to appeal to their specific wants and needs better than competitors (Positioning) Market segmentation defined

19. Every product or service has particular customer profile which can be expressed in terms of likely age, occupation, sex, income, location, among other variables, By targeting media to specific group of consumers based on these purchasing profiles, marketing communication can sell more productively and profitably. The commonly used bases for market segmentation include: Demographics Geographics Geodemographics Psychographics Behavioural Types of segmentation

20. Demographic segmentation tells you a little more about the customer and the customer’s household on measurable criteria that are largely descriptive such as: Age Sex Lifestyle Type of residence Income Occupation Education Religion Ethnic Origin Nationality demographic segmentation

21. Geographic segmentation defines customers according to their location. This can usually be a useful starting point. Multinational organisations often tend to segment geographically by dividing their global organisation into operating units built around specific geographic markets. Criteria may include: Post Code City, town, village or rural Coastline or Inland Region Economic or Political Union/association Country or Continent Population Climate geographic segmentation

22. Geodemographics can be defined as: 'the analysis of people by where they live' (Sleight, 1997, p. 16) It combines geographic information with demographic and sometimes even lifestyle data about neighbourhoods. This helps organisations to understand where their customers are, to develop more detailed profiles of how those customers live, and to locate and target similar potential customers elsewhere. A geodemographic system, therefore, will define types of neighbourhood and types of consumer within a neighbourhood according to their demographic and lifestyle characteristics. Values, attitudes, motivations Interests, opinions, hobbies (lifestyles) geodemographic segmentation

23. Psychographics, or lifestyle segmentation, is an altogether more difficult area to define, as it involves intangible variables such as the beliefs, attitudes and opinions of the potential customer. It has evolved in answer to some of the shortcomings of the methods described above as a means of getting further under the skin of the customer as a thinking being. The idea is that defining the lifestyle of the consumer allows the marketer to sell the product not on superficial, functional features, but on benefits that can be seen to enhance that lifestyle on a much more emotional level. The term lifestyle is used in its widest sense to cover not only demographic characteristics, but also attitudes to life, beliefs and aspirations PSYCHOGRAPHIC SEGMENTATION

24. Bhavioural segmentation relates to the individual's relationship with the product or service on offer. It is quite possible that people with similar demographic and/or psychographic profiles may yet interact differently with the same product. Segmenting a market in these terms, therefore, is useful to marketers. Bases for behavioural segmentation will include: End Use Benefits sought Purchase occasion Purchase behaviuor Usage Rate Attitude Perceptions and beliefs Buyer readiness stage (AIDA) behavioural segmentation

25. It is unlikely that any one segmentation variable will be used absolutely on its own. It is more common for marketers to use a multivariable segmentation approach, defining a `portfolio' of relevant segmentation variables, some of which will be prosaic and descriptive while others will tend towards the psychographic, depending on the product and market in question. The market for adult soft drinks includes age segmentation along with some usage considerations (for example as a substitute for wine as a meal accompaniment), some benefit segmentation (healthy, refreshing, relaxing), and lifestyle elements of health consciousness, sophisticated imagery and desire for exotic ingredients. The emergence of geodemographics in recent years, is an indicator of the way in which segmentation is moving, that is, towards multi­variable systems incorporating psychographics, demographics and geographics. multivariable segmentation

26. Before segmentation can take place, there has to be some definition of the boundaries of that market. Any such definition really has to look at the world through the consumer's eyes, because the consumer makes decisions based on the evaluation of alternatives and substitutes. Thus a margarine manufacturer cannot restrict itself to thinking in terms of `the margarine market', but has to take a wider view of `the spreading-fats market‘ including butter and vegetable oil based spreads This whole issue of market definition and its implications for segmentation should answer the question of 'What business are we in?’ We need to be reminded that consumers basically buy solutions to problems, not products, and thus in defining market segments, the marketer should take into account any type of product that will provide a solution to the consumers problems implementing segmentation

27. After defining the boundaries of your market and dividing them into appropriate segments, one decision that must be made is how many segments within the market the organisation intends to target. There are three broad approaches available, Concentrated targeting Differentiated targeting Undifferentiated targeting targeting

28. Marketing Mix2 Segment 2 The concentrated approach is the most focused approach of the three, and involves specialising in serving one specific segment. This can lead to very detailed knowledge of the target segment's needs and wants, with the added benefit that the organisation is seen as a specialist, giving it an advantage over more mass-market competitors This, however, carries a risk of complacency, leaving the organisation vulnerable to competitive entry into the segment. Concentrated targeting

29. Marketing Mix1 Marketing Mix2 Marketing Mix3 Segment 1 Segment 2 Segment 3 A differentiated strategy involves the development of a number of individual marketing mixes, each of which serves a different segment. As with the concentrated strategy, this approach does allow the organisation to tailor its offerings to suit the individual segments, thus maintaining satisfaction. It also overcomes one of the problems of concentration by spreading risk across the market, so that if one segment declines, the organisation still has revenue from others. differentiated targeting

30. Marketing Mix The Market The undifferentiated approach is the least demanding of the three approaches, in that it assumes that the market is one great homogeneous unit, with no significant differences between individuals within that market. Thus a single marketing mix is required that serves the needs of the entire market. The emphasis is likely, therefore, to be on developing mass communication, mass distribution and as wide an appeal as possible. An undifferentiated involves relatively low costs, as there is only one marketing mix that does not require the depth of research, fine tuning and updating that a concentrated or differentiated strategy would entail. It could also lead to the possible maximisation of economies of scale, because of having a single product in a potentially large market. undifferentiated targeting

31. There are a number of factors influencing the choice of targeting strategy. Marketing theory may well point to a particular strategy as being ideal, but if an organization's resources cannot support and sustain that strategy, then an alternative must be found. A smaller organisation may, for example, need to adopt a concentrated strategy (perhaps based on a geographic segment in a consumer market, or on a specialist niche in a B2B market) to generate the growth required to allow a wider coverage of the market. A choice of strategy can also be made within the context of the product itself. certain types of product lend themselves more readily to certain approaches. For example a product with many potential variations that involve a high level of psychological relationship with the customer (such as clothing or cosmetics) is better suited to a differentiated or concentrated approach. Other products with a more functional bias can be treated in a more undiffer­entiated way The product life cycle stage might also affect the choice of strategy. Choosing a targeting strategy

32. Strategic decisions cannot be taken in isolation from the activities of the competition. If competitors are clearly implementing differentiated strategies, then it is dangerous for you to adopt a more dilute, undifferentiated approach. It may make more sense to identify the segments within which the competition is strong and then to assess whether it would be possible to attack them head-on in those segments or to find a different niche and make that your own. Thus competition is affecting not only the choice of approach, but the actual choice of segment(s) to target. Competition and targeting strategy

33. There four absolute requirements for any successful segmentation exercise, and unless these four conditions prevail, the exercise will either look good on paper but be impossible to implement, or fail to deliver any marked strategic advantage: • Distinctiveness: • Significantly different from any other segment • Tangibility: • Segment must be a sufficient size to make its pursuit worthwhile • Accessibility: • Segment has to be accessible for the delivery of goods and services to the customer • Defendability: • Organisations must be able to a sufficiently strong differential advantage to defend its presence in the segment against competitive incursions Criteria for successful segmentation

34. Positioning in Marketing refers to the relative perceptual position of one brand compared with competing brands Definition: Positioning is the act of designing the company's offer and image so that it offers a distinct and valued place in the target customer's mind. Brands can be positioned in relation to competitive brands on product maps in which relative positions are defined in terms of how buyers perceive key characteristics. A basic perceptual map plots brands in perceived price and perceived quality terms. positioning

35. ‘High’ price Cowboy Brands PremiumBrands ‘Low’ quality ‘High’ quality Bargain Brands EconomyBrands ‘Low’ Price Perceptual map

36. Price and quality are clearly important elements in every marketing mix. But, in the customer's opinion, they cannot be considered independent variables. A 'high' price will almost always be associated with high quality and equally, low price with low quality. Thus, while everybody would like to buy a bargain brand, there is a problem to overcome. Will customers accept that a high quality product can be offered at a low price? Public concern about such promotional pricing has resulted in the introduction of restrictions on the use of these techniques. Promotions have to be part of a genuine 'sale', and stores must provide evidence of this fact. Price and quality positioning

37. In groups of four, identify for class discussions the potential benefits of Segmentation to be gained whether looking at the customer, the marketing mix or the competition. Benefits of segmentation group activity

38. In your groups, generate answers to the following question: What is market segmentation? What are the main benefits of market segmentation to marketers? In what ways are demographic variables used for segmentation? What is the impact of status-consciousness on marketing? What demographic factors determine social class? What are the relevant factors within socio-economic groups that aid segmentation? What does 'psychographics' mean? Why is psychographics important to marketers? Quick quiz