Lecture 5: Strategic segmentation

MARKETING STRATEGY

Marketing strategy is a set of decisions for designing and delivering specific and significant long-term
goals. Important parts are

- target segments - competitive areas (where will we compete)

- positioning – differentiation (how will we win)
- means/tools – product, promotion, place (how will we get there)
- economic reasoning – pricing (how will we generate)

Good strategy needs to be well developed, innovative, constantly changed, upgraded as well as
different from the competitors, convenience and routine.

Strategy is NOT planning itself, analytical decision-making tool (such as matrix), efficiency or
productivity approach or tool (example TQM, BPR)

MARKETING STRATEGY DEVELOPMENT

1. step: Segmentation (defines bases for segmentation and results in developing profiles)
2. step: Targeting (evaluating attractiveness of each segment, choosing target markets)
3. step: Positioning (developing promises and marketing mix for target segments)

SEGMENTATION

Market segment consists of a group of customers who share similar set of needs, wants, behaviours
or attitudes.
Segmentation is a process of identifying relevant and significant differences between consumers ->
focus and adjust marketing activities -> gain competitive advantage.
Main Q for segmentation: how can we contact them, how to engage them and adjust the activities.

Bases for segmentation: geographic, demographic, psychographic (attitude and behaviour)

- Demographics: the wides, examples: age, life cycle, gender, income, social class, race, culture
- Geographic: makes sense in large areas
- Psychographic: address the behaviour, attitude, opinions, interests and free time – VALS
framework (24Q for differentiation of customers that are related to consumption)

Modern segments of psychographic segmentation: nerds, geeks, hipsters and others.

Behavioural variables of psychographic segmentation:

- More specific and actionable

- Occasions, benefits (example toothpaste), usage rate, user status, loyalty, buyer-readiness

Behavioural segmentation breakdown related to awerness, relevancy of trends, loyalty.

-> Example – Covid segment: online shopping, changing fervency and distribution channels

Situational/occasions segmentation -> Example – cakes: special occasion or every week thing

Online-behaviour segmentation: each move is tracked, lots of information about geographic factors,
unique users profiles (such as birthdays), used keywords, explicit preferences.
 SEGMENTATION IN PRACTIE

Levels of segmentation – mass market, multiple segments, niche market, individual customisation.

Customer persona – using a single person profile to get a better picture of targeted people.

Effective segmentation criteria -> SMART objective (specific, measurable, achievable, realistic, time)

Segmentation as process

1. Understanding the market in broad terms

2. Identifying segments (firstly demographic and behavioural)
3. Describing and profiling segments (psychographics and situational)
4. Attract segments and evaluate how to attack them

Two approaches of identifying segments: start with group characteristics or frequency of customers

Profiling segments usually using indexes and graphs

TARGETING

THE COMPETITIVE BOX

Main thing about this approach:

- Not missing the opportunities outside the category

- Attracting new customers
- Important to segment markets for customers as well
- Developing new business communications, 4P’s adjustments and models
- Thinking outside the competitive track
Ways of achieving those goals:

Possible tool for expanding market definition: product-customer matrix (starting with need)

Improving and innovation by doing new customer’s job (coffee keeps you awake and way of
socialising; Wii not only as a fun kids trend but also a way for elderly to stay active)

Blue ocean logic approach: focusing on new demand and ways to make competiton irrelevant.
Example: Cirque de Soleil - circus that expended and included opera in their business model.

 SIX PATHS FRAMEWORK

1. Target substitutes (Evita breakfast cookies as a way of healthy breakfast)
2. Target alternative strategic groups within industry (F1 hotel combined with hostel)
3. Redefine buyers (target different link in buyers chain; instead of parents target kids)
4. Offer complementary product or service for your original product
5. Redefine product category orientation – functional and emotional
6. Hunt for and co-shape the emerging trends (CBD used in beverages, chocolate etc.)
Lecture 6: Positioning and brand development
BRANDING

Brand is a name, term, sign, symbol, design or combination of them, intended to identify the goods
and differentiate them from competitors.

Branding = empowering products with the power of brand

Main aspect of branding: differentiation and a convincing symbol of promise for target segment.

Brand identity: uniqe set of brand associations that the brand strategist aspires to create or maintain

- Represents what the brand stands for

- Imply a promise to customers
- Help establish a relationship between the brand and the customer by generating a value
proposition involving functional, emotional or self-expressive benefits
- Examples of most valuable brands (Forbs, 2020): Apple, Google, Microsoft, Amazon, Fb, Cola

Advantages of strong brand: larger margins, greater loyalty, improved perception of product
performance, more inelastic consumer response, greater trade cooperation, increased marketing
communication effectiveness, possible licencing opportunities and less vulnerability to crises.

Strategic brand management:

brand identity (process)  differentiation and positioning (strategy)  added value = brand equity

Brand value represents net present value of future brand earnings

Brand value chain

Brand equity is added value of the brand, reflected in the way consumers think, feel and act towards
the brand.
Key elements of Consumer Based Brand Equity(CBBE):
Awerness, recognition, brand knowledge (associations, beliefs), evaluation (quality, preferences) and
behaviours (differential responses)
Key drivers of brand equity: scale, aspiration and innovation
Brand Dynamics Pyramid aka BrandZ model of CBBE

Brand resonance pyramid

Interbrand brand valuation model – from market segments through different drivers to brand value

Ways to build brand equity

1. Choice and development of brand elements (visual identity)

2. Managing brand touch points (customer experiences/journey)
3. Managing (leveraging) secondary associations, for example country of origin
4. Building brand community
5. Integrated/holistic offering and all key marketing (4P‘s) activities

Brand element choice criteria: memorable, meaningful, likely, transformable, adaptable, protectable

Secundary souses of brand knowledge and equity – people (employees, endorsers), things (events),
places (channels) and other brands (alliances and extensions)
Key activities of brand strategy

1. Development and management of differentiated and relevant competitive positioning

2. Modification of existing brand elements, repositioning, adding extensions
3. Diversification and management brand portfolios

BRANDING POSITIONING

Branding positioning is the act of designing a company’s offering, brand and image to occupy a
distinctive and valued place in the minds of the target customers. Example: Donat Mg, Cockta.

Key activities of brand positioning:

- Defining competitive frame of reference: market and competitors > target segment
- Defining meaning and benefits - associations, attributes, points of parity and difference
- Inspire, summarize and articulate the essence of meaning - brand mantra (USP/slogan)

Competitive frame of reference – two key dimensions: price and attributes/benefits. Done in table
or in perceptual map which allows us more dimensions.

Approaches positioning:

- STRUCTURED
- Bull’s Eye is integrative framework that includes different layers: values/personality, visual
identity, substations, points-of-parity and difference, brand mantra.
- Strategic Canvas example: Yellow Tail brand mantra – coming up with easy wine.
- UNSTRUCTURED, ARTISTIC, INSPERATINAL
- Storytelling brand narratives, example: Apple, Toms shoes
- Brand archetypes connecting brand with certain person characteristics (e.g. explorer, hero)
- Cultural or Iconic Branding Model (Holt)

Brand category extensions Example: Milka, Mars (from bars to ice cream and even pet food),
Important since it might cause unwanted associations with our brand.

Two ways:

- House of brands – owning variety of clothes brands that aren’t related. Example: VF firm
- Branded house – owning related products. Example: Nivea and Sony

With large assortment it is important that the brands perform some function, possible brand roles:
high-end prestige – cash cows, low-end entry level – flankers.