Ch. 7: Segmenting, Targeting, and Positioning

1. Ch. 7: Segmenting, Targeting, and Positioning

2. Market Segmentation “In business-to-business marketing, segments are clusters of firms that are distinct from others in terms of what they need and buy as well as how they buy”

3. Targeting “Producing an offering that meets the needs of customers in the segment better than the competitor’s, and reach segment through communication and distribution channels so that customers realize the superior value offered.”

4. Choosing Segments Marketers choose segments to target by: • Measurability • Accessibility • Substantiality • Actionability

5. Effective Segments “An effective segment has members that homogeneous within the segment and those members as heterogeneous as possible with the members of other segments.”

6. Positioning • Relationship of product and marketing activities • In comparison to other segment participants must demonstrate superior value to consumers • Positioning is in the mind of consumer • Resources often managed to ensure successful positioning

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

8. Business to Business Segmentation

9. a 1 b c 2 d 3 4 Key elements of value chain contributing to offering – complicated chain of activities because of complicated offering Segments and The Value Chain – Exhibit 2a Value Chain Segment Offering • Value Enabling • Infrastructure • People Management • Technology Development & Mgt • Resource Acquisition • Value Creating • Input Logistics • Operations • Delivery Logistics • Marketing • Service a Subgroupswith differingneeds b c d Several sub-groups in the market segment due to differing needs Key elements of offering addressing subgroups in the segment –complex offering

10. a b Fewer key elements of offering addressing subgroups in the segment Segments and The Value Chain – Exhibit 2b Value Chain Offering Segment • Value Enabling • Infrastructure • People Management • Technology Development & Mgt • Resource Acquisition • Value Creating • Input Logistics • Operations • Delivery Logistics • Marketing • Service a 1 b 2 Fewer sub-groups in the market segment due to more homogeneous needs Key elements of value chain contributing to offering – simpler chain of activities because of simpler offering

11. Analytical Approach to Segmentation Produces to sets of data: • Determine relative size and growth potential of segments • Determine individual segment needs and buying behavior

12. North American Industry Classification System (NAICS) Industry classifications designed and used by the U.S. government, Canada and Mexico. Visit: http://www.census.gov/naics/for full description.

13. North American Industry Classification System (NAICS)

14. 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

15. Factors in Assessing Segment Attractiveness • Size of Segment • Growth Rate of Segment • Intensity of Unmet Need(s) • Reach ability of Segment through Communications Channels • Readiness of Segment to Seek and Adopt a Solution • Likelihood of Competitive Intensity • Sufficiency of Channel Reach • Likely Value Contribution by Channel(s) • Match Between Segment Needs and Supplier’s Strengths • Differentiability of Supplier’s Offering • Opportunity to Achieve Strategic Goal by Addressing Segment • Opportunity to Achieve Learning Goal by Addressing Segment

16. Logical Analysis of Market Segments • Setting Goals • Achieving sales level, Growing at a desirable rate, And maybe other tangible goals • Defining Segments • Measures that reflect differences in need

17. Segment Attractiveness for Hypothetical Example

18. Conservatives Pragmatists Sales from New Adopters/ period Visionaries Laggards Technophiles Time Technology Adoption Life Cycle (TALC) Also shown as Exhibit 2-6

19. Technology Adoption Life Cycle: Adopter Categories • Technophiles—tries out the latest and greatest technology, does 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 if unless technology is easily adopted with minimal difficulty • Conservatives—only buy when doesn’t cost to adopt, need to be convinced offering exact for needs • Laggards—will avoid adoption of technology at all costs

20. 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

21. Positioning of a Product Line • Goal is get members of the different segments to see and value both the differences and similarities • Relate to the overall corporate brand positioning, or at least considered in light of it. • A flagship product may be desired. • Position consistent with McKenna’s idea of market ownership