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Lecture 3

STP Strategic Decisions

(Segmentation - Targeting - Positioning)

Copyright: Raja Shuja-ul-Haq (2009)

A Relevant Quote

“Those who want to be everything for everyone end-up being nothing for no one”

Success lies in being “something for someone” …
Success lies in being “something for
someone” …

What is a “Segment”?

A segment is a unique group of customers (or potential customers) who share some common characteristics that make them different from the other groups of customers in the market

People are different and so are customers

Some segments:

have different needs require different versions of the same product pay different prices buy in different places; and can be reached by different media

Copyright: Raja Shuja-ul-Haq (2009)

What is “Market Segmentation?

Simply put;

Market Segmentation is the activity of dividing the “mass market” into “homogeneous customer groups” (i.e. market segments) …

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation – Background

Originally, marketing was “mass” and “undifferentiated

Today few markets are undifferentiated

Segmentation recognizes this and identifies consumers with similar needs and characteristics (segments)

These segments can then be targeted using an appropriate marketing mix

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation:

Market Segments

1 2 7 3 Mass Market 6 4 5
1
2
7
3
Mass Market
6
4
5

Copyright: Raja Shuja-ul-Haq (2009)

Targeting:

1 2 8 3 Position Product 7 4 Price Placement 6 Promotion
1
2
8
3
Position
Product
7
4
Price
Placement
6
Promotion

Copyright: Raja Shuja-ul-Haq (2009)

The first production Model T Ford (1909 model year) was assembled at the Piquette Avenue Plant

The first production Model T Ford (1909 model year) was assembled at the Piquette Avenue Plant in Detroit on October 1, 1908. Over the next 19 years relatively few changes were made to the basic design. By 1926 the design was so antiquated that the cars could not compete with more modern designs from companies like Chevrolet.

In 1926 colours other than black were offered, in an attempt to boost sales.

Did Henry Ford understood Market Segmentation?

“The buying public could have Model T Fords in any colour, so long as it's black“

Henry Ford

Market Segmentation – Leads to

Greater understanding of customer needs

Focus of competitive analysis and differentiation

More effective resource allocation

Improved customer satisfaction (tailored marketing mix)

Improved planning through specific segment focus

Copyright: Raja Shuja-ul-Haq (2009)

Why Market Segmentation?

Differentiation
Differentiation

Copyright: Raja Shuja-ul-Haq (2009)

Target Market Selection
Target Market
Selection
Market Segmentation
Market
Segmentation
Identifying Opportunities (and Threats)
Identifying
Opportunities
(and Threats)
Tailored Marketing Mix
Tailored
Marketing Mix

Marketing Audit

Marketing Mix Target Market
Marketing Mix
Target Market
Marketing Audit Marketing Mix Target Market Placement Channels Coverage Assortment Locations Inventory Transport Product Product variety
Marketing Audit Marketing Mix Target Market Placement Channels Coverage Assortment Locations Inventory Transport Product Product variety

Placement

Channels

Coverage

Assortment

Locations

Inventory

Transport

Product

Product variety Quality Design Features Brand name Packaging

Price

Promotion

List price Discounts Allowances Payment period Credit terms

Sales promotion Advertising Sales forces Public relations Direct marketing

Copyright: Raja Shuja-ul-Haq (2009)

Lets consider we are selling a Pablo Picasso” painting …

Lets consider we are selling a “ Pablo Picasso ” painting … Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

To some customers, we can sell it for up to 50 pounds

To the wrong age customers, not even 50 pence

To the right customer, it can easily fetch us:

50 million pounds !!!

Copyright: Raja Shuja-ul-Haq (2009)

So, the moral of the story …

So, the moral of the story … Why should we waste our effort on the wrong
Why should we waste our effort on the wrong people ??? Why not target people who
Why should we waste our effort on
the wrong people ???
Why not target people who want our
product the most and are willing to
pay the highest price for it ???

Copyright: Raja Shuja-ul-Haq (2009)

It is worth spending time considering who the best customers of your product are, what segment

It is worth spending time considering who the best customers of your product are, what segment are they in and how to reach them best … this is exactly what market segmentation has to offer as a marketing tool …

Copyright: Raja Shuja-ul-Haq (2009)

Importance of Segmentation If you don’t know what you are aiming at, how can you possibly

Importance of Segmentation

If you don’t know what you are aiming at, how can you possibly expect to hit the target ???

Copyright: Raja Shuja-ul-Haq (2009)

An Important Concern …

Marketers also need to specify who should really be considered as the customer ? Is it
Marketers also need to specify who
should really be considered as the
customer ?
Is it the end-user of a product or the person
who signs the cheque made out to the
supplier ?
Is it the householder or the retailer ?

Copyright: Raja Shuja-ul-Haq (2009)

Three levels of markets (by focus)

Step 1. The Disaggregated Market C7 C1 C3 C4 C8 C2 C6 C5
Step 1. The Disaggregated Market
C7
C1
C3
C4
C8
C2
C6
C5

The characteristics of individual customers are understood

Copyright: Raja Shuja-ul-Haq (2009)

Step 2. The Segmented Market S1 S2 S3 C1 C3 C5 C2 C4 C7 C6 C8
Step 2. The Segmented Market
S1
S2
S3
C1
C3
C5
C2
C4
C7
C6
C8

Customers are grouped into segments on the basis of having similar characteristics

Copyright: Raja Shuja-ul-Haq (2009)

Step 3. The Target Market S1 S2  S3 . C1 C3 C5 C2 C4 Marketing
Step 3. The Target Market
S1
S2
S3
.
C1
C3
C5
C2
C4
Marketing Mix
C7
C6
C8

Segment 3 is judged to be most attractive and a marketing mix strategy is designed for the target market

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation Methods

Market Segmentation - Methods

For Consumers (B2C)

Geographic

Demographic

Geodemographic

Psychographic

Behavioural

Benefits Sought

For Businesses (B2B)

Location

Industry Type

Business Size

Business Type

Application (light / heavy)

Loyalty (to brand or supplier)

DMU (Decision-making Unit)

Benefits Sought

Copyright: Raja Shuja-ul-Haq (2009)

B2C Segmentation
B2C Segmentation
B2C Segmentation Behavioural  Benefits Sought  Purchase Occasion  Purchase Behaviour  Usage  Perceptions

Behavioural

Benefits Sought Purchase Occasion Purchase Behaviour Usage Perceptions and Beliefs

B2C Segmentation Behavioural  Benefits Sought  Purchase Occasion  Purchase Behaviour  Usage  Perceptions

Psychographic

Lifestyle Personality

B2C Segmentation Behavioural  Benefits Sought  Purchase Occasion  Purchase Behaviour  Usage  Perceptions
Profile
Profile

Demographic Socio-Economic Geographic

Copyright: Raja Shuja-ul-Haq (2009)

1. Profile Segmentation: Geographic

Division of a market according to areas or regions;

Town City Region (North, Central, South) Country District / State / Province Trading Zone (i.e. NAFTA, EU)

Copyright: Raja Shuja-ul-Haq (2009)

1. Profile Segmentation: Geographic Division of a market according to areas or regions;  Town 

1. Profile Segmentation: Demographic

Division of a market according to age, gender, income-levels, family life- cycle stages and level of education;

18-25 age groups, over 55 year olds

Children, teenagers, young adults, newly weds, married without children, married with children, married with grown-up children, full nesters and empty nesters

Male, Female

Upper class, upper-middle class, middle class, lower-middle class and lower class

Graduate, post-graduate, high school, computer literacy etc.

Copyright: Raja Shuja-ul-Haq (2009)

Family Lifecycle Stages:

Age, Marital Status, Employment Status and Children
Age, Marital Status,
Employment Status
and Children
Solitary retired
Solitary retired

Middle-aged divorced no children

Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children

Empty nesters

Empty nesters

married working

married retired

Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children
Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children
Young divorced no children
Young divorced
no children
Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children

Middle-aged married no children

Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children
At home single
At home single
Young couple no children
Young couple
no children
Young parents
Young parents
Middle-aged parents
Middle-aged
parents
Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children
On own young
On own young
Middle-aged divorced no dependant children
Middle-aged divorced
no dependant children
Young divorced with children
Young divorced
with children

Middle-aged divorced with children

Family Lifecycle Stages: Age, Marital Status, Employment Status and Children Solitary retired Middle-aged divorced no children

On own middle-aged

Copyright: Raja Shuja-ul-Haq (2009)

3. Profile Segmentation: Socio-Economic

Division of a market according to socio-economic grades;

A (Upper Middle Class) B (Middle Class) C1 (Lower Middle Class) C2 (Skilled Working Class) D (Manual Working Class) E (Lowest Level of Subsistence)

Copyright: Raja Shuja-ul-Haq (2009)

3. Profile Segmentation: Socio-Economic Division of a market according to socio-economic grades;  A (Upper Middle

Social Status (an exemplary application)

Social Grade

Social Status

Occupation

% Families

A

Upper middle class

Higher managerial professionals

3

   

Intermediate

 

B

Middle class

managerial

10

professionals

C

1

Lower middle class

Junior

24

   

management supervisory level

 

C

2

Skilled working class

Skilled manual workers

30

D

Manual workers

Semi / unskilled manual workers

25

E

Lowest level of subsistence

State pensioners or widows / lowest grade workers

8

Social Status ( an exemplary application ) Social Grade Social Status Occupation % Families A Upper
Social Status ( an exemplary application ) Social Grade Social Status Occupation % Families A Upper

Copyright: Raja Shuja-ul-Haq (2009)

A Common Mistake …

A Common Mistake … A marketer might immediately consider socio-demographic segments as being customer groups; ignoring

A marketer might immediately consider socio-demographic segments as being customer groups; ignoring many other segmentation possibilities

Copyright: Raja Shuja-ul-Haq (2009)

For Example …

Consider a posh restaurant. One market segment can be “women aged 25-35 who prefer eating out
Consider a posh restaurant. One market
segment can be “women aged 25-35 who
prefer eating out and are not too price
sensitive”
Further segmentation possibilities of this
segment can be “lunchtime versus evening
customers”; and “regulars versus infrequents”

Copyright: Raja Shuja-ul-Haq (2009)

2. Behavioural Segmentation

Division of a market according to customer buying habits and product usage;

Purchase Behaviour (brand switchers, innovators, bulk buyers, first-time buyers / point-of-entry customers) Purchase Occasion (self buy, gift) Product Usage (light users, heavy users, non-users) Perceptions and Beliefs (favourable, unfavourable) Benefits Sought (image, performance, economy)

2. Behavioural Segmentation Division of a market according to customer buying habits and product usage; 

Copyright: Raja Shuja-ul-Haq (2009)

Many chocolate brands like Nestle’s Black Magic and “Ferrero Rocher” target the “gift segment” of the confectionary market

Many chocolate brands like Nestle’s Black Magic and “ Ferrero Rocher ” target the “gift segment”

Copyright: Raja Shuja-ul-Haq (2009)

Nokia E90 Communicator targets the “innovator segment” for its fifth generation of Communicators
Nokia E90 Communicator targets the “innovator segment” for its
fifth generation of Communicators
Nokia E90 Communicator targets the “innovator segment” for its fifth generation of Communicators Copyright: Raja Shuja-ul-Haq

Copyright: Raja Shuja-ul-Haq (2009)

3. Psychographic Segmentation

Division of a market according to the customers’ mental orientation;

Lifestyle (trendsetters, conservatives, sophisticates, health-conscious) Personality (youthful, adventurous, freedom-loving, intimate)

Copyright: Raja Shuja-ul-Haq (2009)

3. Psychographic Segmentation Division of a market according to the customers’ mental orientation;  Lifestyle (
Nesvita brand of Nestle targets a distinctive “lifestyle segment” of “health and fitness conscious young women”
Nesvita brand of Nestle targets a distinctive “lifestyle
segment” of “health and fitness conscious young women”
Nesvita brand of Nestle targets a distinctive “lifestyle segment” of “health and fitness conscious young women”
Mountain dew has targeted a distinctive “personality segment” in the softdrink market
Mountain dew has
targeted a distinctive
“personality segment”
in the softdrink market

Marlboro has done the same in the cigarette market …

Marlboro has done the same in the cigarette market …
B2B Market
B2B Market
Macrosegment 2 Macrosegment 1 Macrosegment 3 (medium-sized (large companies) (small companies) companies)
Macrosegment 2
Macrosegment 1
Macrosegment 3
(medium-sized
(large companies)
(small companies)
companies)
Microsegment 1 (prime choice criterion: reliability)
Microsegment 1
(prime choice
criterion: reliability)

Copyright: Raja Shuja-ul-Haq (2009)

Microsegment 2 (prime choice criterion: convenience)
Microsegment 2
(prime choice criterion:
convenience)
Microsegment 3 (prime choice criterion: price)
Microsegment 3
(prime choice
criterion: price)
B2B Segmentation
B2B Segmentation
B2B Segmentation Macrosegmentation  Organizational size  Industry and business type  Geographic location Copyright: Raja

Macrosegmentation

Organizational size Industry and business type Geographic location

Copyright: Raja Shuja-ul-Haq (2009)

B2B Segmentation Macrosegmentation  Organizational size  Industry and business type  Geographic location Copyright: Raja

Microsegmentation

Choice criteria (i.e. quality or price) Decision-making unit (DMU) Decision-making process Application (light / heavy) Loyalty (contract / one-off transaction) Innovativeness

B2B Segmentation: Macro

Organizational Size:

Large, medium, small

Industry:

Petroleum, financial, hospitality

Business:

Oil exploration and drilling, banking, hotels

Geographic:

Local, national, global

Copyright: Raja Shuja-ul-Haq (2009)

B2B Segmentation: Micro

Choice criteria:

Quality, price, value in use, delivery, servicing, status

Decision-making unit (DMU) structure:

Centralized (head office level), decentralized (SBU level)

Decision-making process:

Long, short

Innovativeness:

Innovator, early adopter, laggard

Copyright: Raja Shuja-ul-Haq (2009)

B2B Segmentation: Micro

Application:

Light users, heavy users, non-users

Loyalty:

Contractual work, one-off transaction

Copyright: Raja Shuja-ul-Haq (2009)

The “Strategic Segment

Copyright: Raja Shuja-ul-Haq (2009)

Target Segment

Copyright: Raja Shuja-ul-Haq (2009)

x x x x
x
x
x
x

The “Strategic Segment” is …

Fits Culture

Loyal Stable Measurable Appropriate
Loyal
Stable
Measurable
Appropriate

Manageable

The “ Strategic Segment ” is … Fits Culture Loyal Stable Measurable Appropriate Manageable Most profitable

Most profitable

Satisfies

customer needs

Strategic Segment
Strategic Segment

Profitable

Unique

Substantial

Accessible

Copyright: Raja Shuja-ul-Haq (2009)

The “Right Customer

The “ Right Customer ” Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

The “ Right Customer ” Copyright: Raja Shuja-ul-Haq (2009)

The “Right Customer

The “Right Customer” is a customer who:

really likes doing business with you

is not too price-sensitive

doesn’t just buy only when there is a special promotion

gives useful feedback

participates in new product developments

will stay loyal to you for a lifetime, if well-treated

Not all of your customers will fit into this EXCLUSIVE customer segment …
Not all of your customers will fit into this
EXCLUSIVE customer segment …

Copyright: Raja Shuja-ul-Haq (2009)

The Universal Marketing Truth:

NOT

The customer is always

right”

The “Right Customer” is always right !!!
The “Right Customer” is always right !!!

Copyright: Raja Shuja-ul-Haq (2009)

The Universal Marketing Truth : NOT always right” The “Right Customer” is always right !!! Copyright:
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)

Parameters for Measuring

Segment Attractiveness

Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)
Parameters for Measuring Segment Attractiveness Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Market Size (usually, the bigger the better)

Market Growth Rate (the higher the better)

Concentration of Suppliers (the lesser the better) Price Sensitivity (the lesser the better) Bargaining Power of Customers and Suppliers (the lower the better) Market Entry and Exit Barriers * (usually, the lower the better)

* Market entry barriers may include high marketing expenditure necessary

to compete; patents or

high switching costs for customers. Exit barriers

may include specialized production facilities that

can not be easily liquidated, or agreements to provide spare parts to customers.

Copyright: Raja Shuja-ul-Haq (2009)

Competitive Aggression (usually, the lesser the better)

Competitive Differentiation (the more the better)

Segment Match to Organizational Capabilities and Capacity (the more the better)

Segment offers opportunities for the organization to exploit marketing assets, achieve cost and technological advantages and meet strategic managerial objectives

Copyright: Raja Shuja-ul-Haq (2009)

What do you think?

Is Pakistan telecom market really attractive?

Or has it reached maturity???

The 4 Market Segmentation Strategies Copyright: Raja Shuja-ul-Haq (2009)

The 4 Market Segmentation Strategies

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation –

1. Undifferentiated Strategy

Organisation

Post Office
Post Office

Marketing Mix

Product Price Promotion Distribution

Market Segmentation – 1. Undifferentiated Strategy Organisation Post Office Marketing Mix • Product • Price •

Target Market

Everybody
Everybody

One marketing mix for the mass market (i.e. no segments have been identified)

Such a strategy is utilised by …

Companies going after the whole market with one market offer

Companies committed to a “one-size-fit-all” model of working
Companies committed to a “one-size-fit-all”
model of working

Copyright: Raja Shuja-ul-Haq (2009)

This strategy works best only where …

Demand is homogenous in nature (no strong differences in customer characteristics)
Demand is homogenous in nature (no strong
differences in customer characteristics)

Economies of standardized approach to marketing outweigh any advantage of segmenting markets

Company is seeking to achieve cost economies (no market research and product development costs)
Company is seeking to achieve cost economies
(no market research and product development costs)

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation –

2. Focused Strategy

Independent DIY Shops
Independent
DIY Shops

Organisation

Cement Manufacturer
Cement
Manufacturer

Marketing Mix

Product Price Promotion Distribution

Builders Merchants
Builders
Merchants
National DIY Chains
National DIY
Chains
Market Segmentation – 2. Focused Strategy Independent DIY Shops Organisation Cement Manufacturer Marketing Mix • Product

Marketing mix designed for a niche segment (i.e. niche segment has been identified, and a marketing mix is designed for it)

Ideal strategy for small companies, who may stretch their resources too far by competing in more than one segment …

Focused strategy allows R&D expenditure to be concentrated on meeting the needs of one set of
Focused strategy allows R&D expenditure to
be concentrated on meeting the needs of one
set of customers, resulting in better customer
satisfaction and even higher profit margins
(customers are willing to pay premium prices for
specialized products / services which “more precisely”
suit their needs) …

Copyright: Raja Shuja-ul-Haq (2009)

Focus strategy can help a company to avoid competitive rivalry, as compared to committing “majority fallacy”
Focus strategy can help a company to avoid
competitive rivalry, as compared to committing
“majority fallacy” (i.e. blind pursuit of the
largest, most easily identified market segment)

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation –

3. Differentiated Strategy

LEVI’s Jeans
LEVI’s Jeans
Utilitarian Customer Trendy - Casual Price Shopper Mainstream Traditionalist
Utilitarian
Customer
Trendy -
Casual
Price
Shopper
Mainstream
Traditionalist
Market Segmentation – 3. Differentiated Strategy LEVI’s Jeans Utilitarian Customer Trendy - Casual Price Shopper Mainstream
  • Marketing Mix - 1

Market Segmentation – 3. Differentiated Strategy LEVI’s Jeans Utilitarian Customer Trendy - Casual Price Shopper Mainstream
  • Marketing Mix - 2

Market Segmentation – 3. Differentiated Strategy LEVI’s Jeans Utilitarian Customer Trendy - Casual Price Shopper Mainstream
  • Marketing Mix - 3

Market Segmentation – 3. Differentiated Strategy LEVI’s Jeans Utilitarian Customer Trendy - Casual Price Shopper Mainstream
  • Marketing Mix - 4

Market Segmentation – 3. Differentiated Strategy LEVI’s Jeans Utilitarian Customer Trendy - Casual Price Shopper Mainstream
  • Marketing Mix - 5

Separate marketing mix for each segment

This strategy exploits the difference between market segments by designing a specific marketing mix for each segment …

Although this strategy can generate high levels of customer satisfaction and better resource allocation, but the company can loose its cost economies …

Copyright: Raja Shuja-ul-Haq (2009)

Market Segmentation –

4. Customized Strategy

Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
Customer 1
Customer 2
Customer 3
Customer 4
Customer 5
Insurance Company
Insurance
Company
Market Segmentation – 4. Customized Strategy Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
  • Marketing Mix - 1

Market Segmentation – 4. Customized Strategy Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
  • Marketing Mix - 2

Market Segmentation – 4. Customized Strategy Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
  • Marketing Mix - 3

Market Segmentation – 4. Customized Strategy Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
  • Marketing Mix - 4

Market Segmentation – 4. Customized Strategy Customer 1 Customer 2 Customer 3 Customer 4 Customer 5
  • Marketing Mix - 5

Separate marketing mix for each customer (mass customization)

This strategy designs a “customized” marketing mix for each individual customer (usually service customers or B2B
This strategy designs a “customized” marketing
mix for each individual customer (usually
service customers or B2B buyers)

It is an ideal strategy in markets where the requirements of individual customers are unique and their purchasing power is sufficient

(insurance companies, ad agencies, architects, lawyers, MR agencies, B2B suppliers and vendors)

Copyright: Raja Shuja-ul-Haq (2009)

Comparing the 4 Strategies

Broad focus

Narrow focus

 

Alternative

Alternative target

target marketing

marketing strategies

strategies

 
 
 

Differentiated Strategy

Undifferentiated Strategy

 
 

Market Segmentation

Mass Marketing

 
 

Niche Marketing

Mass Customization

Focused Strategy

Customized Strategy

Segments

 

Segments

Identified

Identified Unidentified
Identified Unidentified

Unidentified

?
?

Okapis have serious “targeting” problems ….

They are not really sure who they are attracting!!!

Copyright: Raja Shuja-ul-Haq (2009)

Customer-Benefit Segmentation (CBS)

Customer-Benefit Segmentation (CBS) Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

3 Key Customer Personality Types

Sensory Customers - Use only their basic senses to choose products (like taste, feel, sight);

Example: Children

Social Customers - Are looking for a social appeal / self expression in the products they choose; Example: Young Adults and Teenagers

Anxious Customers - Care about personal health and well-being and also the well-being of their family

Example: Adults with Young Children, Nuclear Families, Health Conscious People

Copyright: Raja Shuja-ul-Haq (2009)

Customer-Benefit Segmentation (CBS)

(of British package holiday

market) Sensory Sociable Anxious Independent Kids and Teens Family with Demographics (7-15) Young people, singles and
market)
Sensory
Sociable
Anxious
Independent
Kids and Teens
Family with
Demographics
(7-15)
Young people,
singles and couples
Children
(18-30)
(full nesters)
Retired senior
citizens/ empty
nesters, cultural
seekers
Personality
Self-involvement,
little interest in
others
Sociable, looking
for a partner,
allocentrics
Hypochondriacs,
psychocentrics
Idol, carefree, calm
and settled
Lifestyle
Hedonistic –
pleasure and
sensation seeking
Active, gregarious,
outward-looking,
intimate, social
Conservative and
security conscious;
care about family
Comfort , harmony
and tranquillity.
Required
Benefits
Fun and
enjoyment /
participating in a
“dream-come-true”
activity
Socialising,
involvements,
spending intimate
time with partner,
sports and leisure
Spending quality time
with family; feeling
of family
togetherness
Experiencing
something different;
escaping everyday life,
relaxation, harmony
Required
Activity
Features
programmes.
Opportunities to
socialise, sports
Homely / relaxing
environment
Sight seeing; unique /
different surroundings

How would you apply CBS to a

Toothpaste Brand?

How would you apply CBS to a Toothpaste Brand ?

Product Category:

Product

Category:

Toothpaste

 

Sensory

Sociable

Anxious

Independent???

Demographics

Kids and Teens

(7-15)

Young people, singles and couples

Family with

Children

 

(18-30)

(full nesters)

 

Self-involvement,

Sociable, looking

Hypochondriacs,

 

Personality

little interest in others

for a partner, allocentrics

psychocentrics

Lifestyle

Hedonistic – pleasure and sensation seeking

Active, gregarious, outward-looking, intimate, social

Conservative and security conscious; care about family

 

Required

       

Benefits

Required

       

Features

 

Advanced Market Segmentation Models

(using two segmentation parameters)

1) Using Customer Satisfaction and Customer Loyalty

Copyright: Raja Shuja-ul-Haq (2009)

Customer Loyalty High Low High Satisfied Stayers Happy Wanderers Customer Satisfaction Hostages Dealers Low
Customer Loyalty
High
Low
High
Satisfied Stayers
Happy Wanderers
Customer
Satisfaction
Hostages
Dealers
Low

Copyright: Raja Shuja-ul-Haq (2009)

High Customer Loyalty Low Satisfied Stayers Happy Wanderers . High These are the customers who are
High
Customer Loyalty
Low
Satisfied Stayers
Happy Wanderers
.
High
These are the customers who are satisfied by
the quality of product / service and remain
loyal with the company due to this reason.
Such customers are satisfied with both the
quality of the product and the value-added
services provided by the company
These customers show every sign of being
satisfied with the quality of the product /
service; but however, they do not give their
loyalty in return. They may choose to buy
elsewhere since tempting new market offers
attract them. Also, cheaper products
available in the market can make them
reconsider their future purchase plans
Customer
Satisfaction
Hostages
Dealers
Low
These customers are the most loyal ones to the
company; but are also the most dissatisfied
ones. They are tied to the business by cost of
switching (both economical and
psychological), service compatibility, loyalty
incentives, corporate policy (in the case of
business travel, a tour operator might be
officially contracted by a company) or the
company has a form of monopoly in a
particular niche market
These customers are not satisfied and shift
suppliers frequently. They are on a constant
search for low prices and the best package in
the market. Such customer are most sensitive to
the promotions and “price drops” by
competitors. They seek special offers and
seasonal discounts

Copyright: Raja Shuja-ul-Haq (2009)

2) Using Customer Relationship Needs and Desired Level of Intimacy with the company

Copyright: Raja Shuja-ul-Haq (2009)

High

Intimacy

wanted by

customers in

relationship

Low

Type of relationship customers want Long-term Short-term Relationship seekers Relationship exploiters Loyal Buyers Arm’s length transaction
Type of relationship customers want
Long-term
Short-term
Relationship seekers
Relationship exploiters
Loyal Buyers
Arm’s length transaction customers

Copyright: Raja Shuja-ul-Haq (2009)

High

Intimacy

wanted by

customers in

relationship

Low

Type of relationship customers want Long-term Short-term Relationship seekers  Relationship exploiters . These customers want
Type of relationship customers want
Long-term
Short-term
Relationship seekers
Relationship exploiters
.
These customers want a long-term relationship
with the company and also, a high degree of
closeness. They take keen interest in providing
their views about their product / service
experience (and even suggestions on improving
the quality), which helps companies to improve
their product / services overtime
Such customers would take the maximum
advantage of different “relationship offers”
provided by the company, i.e. like loyalty
incentives and special seasonal offers; but
however, are likely to defect to the
competition if they are offered better
packages or cheaper rates
Loyal Buyers
Arm’s length transaction customers
These customers want a long-term relationship
with the company but not a close one. They
frequently use the products / services of a
company, but however, they do not go to
increasing lengths to facilitate the managers
with their feedback, nor are they interested to
give suggestions to improve quality
Such customers shop around for the best
package offer in the market and also for low
prices. They are attracted at any company
which can offer the products / services at the
lowest possible price or which offers a
“unique” product / service. They do not want a
close relationship with any particular company;
in fact they keep a watchful eye for best deals
available in the market

Copyright: Raja Shuja-ul-Haq (2009)

Relationship is important in determining the value of an account … A frequent flyer can spend
Relationship is important in determining
the value of an account …
A frequent flyer can spend more than 20,000 pounds in
10 years with British Airways
A loyal Visa member can spend more than 50,000
pounds in a relationship

Copyright: Raja Shuja-ul-Haq (2009)

3) Using Market Attractiveness and Market Position

Copyright: Raja Shuja-ul-Haq (2009)

Market Attractiveness: To what extent the market is attractive to the company …
Market Attractiveness:
To what extent the market is attractive to the company …
Market Position: What position, in terms of market share, the company occupies in a particular market
Market Position:
What position, in terms of market share, the company
occupies in a particular market …

Copyright: Raja Shuja-ul-Haq (2009)

High Market Attractiveness Low High Core Business Peripheral Business Market Position Illusion Business Dead-end Business Low
High
Market Attractiveness
Low
High
Core Business
Peripheral Business
Market
Position
Illusion Business
Dead-end Business
Low

Copyright: Raja Shuja-ul-Haq (2009)

Table Table 3.8 3.8 High Market Attractiveness Low Core Business  Peripheral Business . High Core
Table
Table 3.8
3.8
High
Market Attractiveness
Low
Core Business
Peripheral Business
.
High
Core business represents the area where the
market offers the potential to the business to
achieve its goals and it also fits the
capabilities and competence of the business;
and the business also believes that it can take
a strong market position in that area. Such
areas of the market are high priority for
investments.
Peripheral business represents the area where
the market is less attractive to the business
(i.e. there is no growth, competition is tough,
margins are low and so on). These may be
areas where the business can continue to
operate, but unless the market brings other
benefits to the business, it is not a high
priority.
Market
Position
Illusion Business
Dead-end Business
These are highly attractive markets which offer
everything the business wants; but where the
business can or do take a weak position. These
markets and segments are an illusion because
the market apparently looks great but they
never pay-off.
These are the lowest priority because the
market is not attractive to the business, and the
business can only take a weak position in the
market.
Low

Copyright: Raja Shuja-ul-Haq (2009)

4) Using Internal Capability and Market Segment Attractiveness

Copyright: Raja Shuja-ul-Haq (2009)

Internal Capability: The distinctive competency of a company to serve its customers
Internal Capability:
The distinctive competency of a company to serve its
customers
Market Attractiveness: To what extent the market is attractive to the company …
Market Attractiveness:
To what extent the market is attractive to the company …

Copyright: Raja Shuja-ul-Haq (2009)

Internal capability High Low High Attractive segments that Attractive segments but with match with company poor
Internal capability
High
Low
High
Attractive segments that
Attractive segments but with
match with company
poor match with company
capabilities
capabilities
Market
segment
attractiveness
Unattractive segments but
Unattractive segments that
with match to company
do not match with company
capabilities
capabilities
Low

Copyright: Raja Shuja-ul-Haq (2009)

5) Using Customer Sophistication and Customer Repute

Copyright: Raja Shuja-ul-Haq (2009)

“Right Customer” (Customer Repute): It is a criteria set by the company to evaluate a customer’s
“Right Customer” (Customer Repute):
It is a criteria set by the company to evaluate a customer’s
repute on the basis of customer loyalty, price sensitivity,
involvement (feedback, new product developments),
tendency to give year-round sales, future business
potential etc. We simply examine the extent to which a
customer is our “right customer”
Customer Sophistication: It refers to the degree of know-how the customer possesses regarding your product /
Customer Sophistication:
It refers to the degree of know-how the customer
possesses regarding your product / service and your
competitors (their market offers and prices) …
In simple words, it refers to the “bargaining power” of your
customer to negotiate prices with your company …

Copyright: Raja Shuja-ul-Haq (2009)

High

Customer Repute

(loyalty, future

business potential,

price sensitivity)

Low

High Customer Sophistication Low Sophisticated / Right Customers Unsophisticated / Right Customers Sophisticated / Not Right
High
Customer Sophistication
Low
Sophisticated / Right Customers
Unsophisticated / Right Customers
Sophisticated / Not Right Customers
Unsophisticated / Not Right Customers

Copyright: Raja Shuja-ul-Haq (2009)

Positioning

Positioning
Positioning

“You must have mindshare before you can have market share”

- Christopher M. Knight

Copyright: Raja Shuja-ul-Haq (2009)

“You must have mindshare before you can have market share” - Christopher M. Knight Copyright: Raja

Moving from Targeting to Positioning

Positioning starts with a product, a piece of merchandise, a service, a company, an institution or even a person. But positioning is not what you do to the product. Positioning is what you do to the mind of the potential customer”.

- Ries and Trout

Copyright: Raja Shuja-ul-Haq (2009)

Simply put, positioning is the activity of placing the product at a chosen spot in the minds of the consumers …

Copyright: Raja Shuja-ul-Haq (2009)

Simply put, positioning is the activity of placing the product at a chosen spot in the

The best way to get a view of the human mind is through constructing a Perceptual Map

Copyright: Raja Shuja-ul-Haq (2009)

The best way to get a view of the human mind is through constructing a “

Using perpetual maps to help positioning process

Price

Using perpetual maps to help positioning process Price + Quality - + - Copyright: Raja Shuja-ul-Haq
 
+ Quality - + -
 

+

 
Quality

Quality

-

+

 

-

 
+ Quality - + -

Copyright: Raja Shuja-ul-Haq (2009)

Using perpetual maps to help positioning process

Using perpetual maps to help positioning process Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Perpetual map applied to UK Automobile Market

BMW
BMW

Prestige, Status

Saab
Saab

+

Volvo
Volvo

Personal / Emotional

Ford
Ford
Basic / Rational
Basic /
Rational

-

+

Fiat
Fiat

Copyright: Raja Shuja-ul-Haq (2009)

-

Toyota
Toyota

Economy

Perpetual map applied to US Painkillers Market

Perpetual map applied to US Painkillers Market Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Perceptual Map of Beer Market

(This slide shows only the products)

 

Old Milwaukee

Budweiser

 

Beck’s

Meister Brau

 

Miller

 

 

Coors

 

Stroh’s

 
   

Michelob

Miller

Coors

Lite

Light

 

 

Old

Heineken

Milwaukee Light

Perceptual Map of Beer Market cont’d

(This slide shows only the attributes)

Popular Heavy with Full Bodied Men Special Occasions Blue Collar Dining Out Good Value Premium Popular
Popular
Heavy
with
Full Bodied
Men
Special
Occasions
Blue Collar
Dining Out
Good Value
Premium
Popular
with
Pale Color
Women
On a
Budget
Light
Less Filling

Perceptual Map of Beer Market cont’d

(This slide shows only the attributes)

Heavy Popular Heavy with Full Bodied Men Special Occasions Dining Out Blue Collar Good Value Premium
Heavy
Popular
Heavy
with
Full Bodied
Men
Special
Occasions
Dining Out
Blue Collar
Good Value
Premium
Budget
Premium
Popular
with
Pale Color
Women
On a
Budget
Light
Less Filling
Light

Perceptual Map of Beer Market cont’d

(This slide shows both products & attributes)

Heavy Popular with Heavy Full Bodied • Men Old Milwaukee Budweiser • Beck’s • Meister Brau
Heavy
Popular
with
Heavy
Full Bodied
Men
Old Milwaukee
Budweiser
Beck’s
Meister Brau
• Heineken
Special
Miller •
Occasions
Blue Collar
Dining Out Premium
Good Value
Coors
Stroh’s
Budget
Premium
Michelob
Coors
Popular
Miller
Light
with
Pale Color
Lite
Women
On a
Old
Budget
Milwaukee Light
Light
Less Filling
Light

Three Types of Positioning

Positioning Broad Positioning Specific Positioning Value Positioning
Positioning
Broad Positioning
Specific Positioning
Value Positioning

Operational Excellence Customer Intimacy Product Leadership

Single Benefit Positioning Dual Benefit Positioning (Volvo)

Triple Benefit Positioning (Aquafresh)

Copyright: Raja Shuja-ul-Haq (2009)

More for More More for the Same Less for Much Less More for Less Less for More ???

1. Broad Positioning or Customer Value Disciplines

Operational Excellence : providing reliable products and services at

competitive prices, delivered by minimum difficulty

Customer Intimacy: tailoring the offerings to meet customers’ demand

very precisely

Product Leadership: offering leading-edge products and services

Copyright: Raja Shuja-ul-Haq (2009)

2. Specific Positioning

Companies need to go beyond the broad positioning to express a

more concrete benefit or reason to buy

Some companies advertise a single major benefit, drawing from

such possibilities as: best quality, best performance (BMW), most

reliable, most durable (Land Rover / Volvo), safest (Volvo), fastest

(Ferrari), best value for money (Toyota), least expensive (Hyundai),

most prestigious (Mercedes), best designed or styled (Limousine),

easiest to use or most convenient

Copyright: Raja Shuja-ul-Haq (2009)

2. Specific Positioning

Companies can also use more than one benefit to position their

products (dual benefit and triple benefit positioning)

Volvo has a dual benefit positioning as Safest Car (in Europe and

US) and Most Durable Car (in Mexico)

Aquafresh has a triple benefit positioning i.e. prevents cavities,

gives a fresh breath and whitens teeth (hence the three colours of the

paste to “represent” each of the benefits)

Copyright: Raja Shuja-ul-Haq (2009)

Specific Positioning Strategies

Copyright: Raja Shuja-ul-Haq (2009)

a. Attribute Positioning:

The company positions its product on some attribute or feature

i.e. The Thickest Milk, Clear Softdrink (free of sugar, caffeine and colour)

Copyright: Raja Shuja-ul-Haq (2009)

b. Benefit Positioning:

Product promises a particular benefit

i.e. Ariel EnzyMax claims it cleans better even in cold water …

Copyright: Raja Shuja-ul-Haq (2009)

b. Benefit Positioning: Product promises a particular benefit i.e. Ariel EnzyMax claims it cleans better even

c. Use / Application Positioning:

Product is positioned as the best in certain application

i.e. Head & Shoulders is positioned as the best shampoo for dandruff control

c. Use / Application Positioning: Product is positioned as the best in certain application i.e. Head

Copyright: Raja Shuja-ul-Haq (2009)

c. Use / Application Positioning: Product is positioned as the best in certain application i.e. Head

d. Quality / Price Positioning:

Product is positioned at a certain quality or price level …

i.e. Zong is positioning its packages on economy

d. Quality / Price Positioning: Product is positioned at a certain quality or price level …

Copyright: Raja Shuja-ul-Haq (2009)

d. Quality / Price Positioning: Product is positioned at a certain quality or price level …

d. Quality / Price Positioning:

Product is positioned at a certain quality or price level …

i.e. “The Famous Grouse” is positioned as the finest whiskey brand in the world

d. Quality / Price Positioning: Product is positioned at a certain quality or price level …

Copyright: Raja Shuja-ul-Haq (2009)

e. User Positioning:

Product is positioned in terms of target user group …

i.e. “Johnson & Johnson” has positioned all its products around babies, which has enabled the consumers to broadly perceived all the company’s products as “mild and gentle” …

Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

f. Category Positioning:

The company may describe itself as the category leader

i.e. HP means printers, Xerox means photocopiers, Gillette means shaving systems

f. Category Positioning: The company may describe itself as the category leader i.e. HP means printers,
f. Category Positioning: The company may describe itself as the category leader i.e. HP means printers,
f. Category Positioning: The company may describe itself as the category leader i.e. HP means printers,

Copyright: Raja Shuja-ul-Haq (2009)

g. Competitor Positioning:

The product suggests its superiority or difference from a competitor’s product

i.e. 7-Up called itself “the Uncola”, Avis described itself as a company “that tries harder” (than Hertz, by implication)

Copyright: Raja Shuja-ul-Haq (2009)

Zong and Mobilink are positioning their upcoming offers and packages against each other … Zong emphasizing
Zong and Mobilink are positioning their upcoming offers and packages against each other … Zong emphasizing
Zong and Mobilink are positioning their upcoming offers
and packages against each other … Zong emphasizing on
low call rates and Mobilink on better network coverage …

Copyright: Raja Shuja-ul-Haq (2009)

Since their presence in the Pakistan Banking Industry, Islamic Banks have positioned their banking products against
Since their presence in the
Pakistan Banking Industry,
Islamic Banks have
positioned their banking
products against those of
conventional banks under the
claim of riba-free banking …

“The only interest we have is in you”

- Slogan of Meezan Bank Limited.

Copyright: Raja Shuja-ul-Haq (2009)

Since their presence in the Pakistan Banking Industry, Islamic Banks have positioned their banking products against

h. Positioning with Respect to Product Class:

The product is associated with a particular product class ...

i.e. Margarines position themselves with respect to butter, Vegetable oils (in Pakistan) position themselves with respect to “ghee”

Copyright: Raja Shuja-ul-Haq (2009)

h. Positioning with Respect to Product Class: The product is associated with a particular product class
Knorr has associated its “make-a-meal” packaged Chinese food items with Chinese food served in restaurants …
Knorr has associated its
“make-a-meal” packaged
Chinese food items with
Chinese food served in
restaurants …

Copyright: Raja Shuja-ul-Haq (2009)

Knorr has associated its “make-a-meal” packaged Chinese food items with Chinese food served in restaurants …

How to make your positioning effective? Always follow the 4 Cs of effective positioning

CREDIBILITY
CREDIBILITY
How to make your positioning effective? Always follow the 4 Cs of effective positioning CREDIBILITY CONSISTANCY
CONSISTANCY
CONSISTANCY
How to make your positioning effective? Always follow the 4 Cs of effective positioning CREDIBILITY CONSISTANCY
CLARITY
CLARITY
COMPETITIVENESS
COMPETITIVENESS

Copyright: Raja Shuja-ul-Haq (2009)

Try to keep your positioning simple

- associate with one or a low number of functional benefits

Try to keep your positioning simple - associate with one or a low number of functional
Try to keep your positioning simple - associate with one or a low number of functional
Try to keep your positioning simple - associate with one or a low number of functional
Try to keep your positioning simple - associate with one or a low number of functional
Try to keep your positioning simple - associate with one or a low number of functional

Copyright: Raja Shuja-ul-Haq (2009)

Case Analysis 2: Black and Decker Drills

Case Analysis 2: Black and Decker Drills Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Black and Decker” are in the drill market

Or are they ???

Do people buy drills because they want a drill ???

No

they buy drills because they want holes

… and drills just make hole-making easy

Copyright: Raja Shuja-ul-Haq (2009)

However, research reveals that some men buy drills

to be

the complete man

by possessing a full

armoury of DIY (do-it-yourself) equipment

So, in both cases, the benefits sought by the customer vary from purely functional to purely emotional

Both the cases require a different positioning strategy for “Black and Decker” drills

Copyright: Raja Shuja-ul-Haq (2009)

Positioning Plan
Positioning Plan

However, the marketing managers of

“Black and Decker” drills should ask

themselves ….

Copyright: Raja Shuja-ul-Haq (2009)

Should “Black and Decker” be positioned as a highly functional tool or as a part of a complete man’s toolkit?

And what about the female buyers?

Should it be positioned differently for different segments?

Or would it cost too much money?

Would it dilute the message and cause confusion?

Copyright: Raja Shuja-ul-Haq (2009)

Case Analysis 3: Lucozade Energy Drink

Case Analysis 3: Lucozade Energy Drink Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

 Lucozade was initially positioned as a “sick child’s drink” and was sold only in the

Lucozade was initially positioned as a “sick child’s drink” and was sold only in the chemist shops

Later on, it was repositioned as a “healthy adult’s drink” in the much faster growing healthy adults’ softdrink market and was then sold everywhere; sharing freezer-space with Coke and Pepsi

Due to this successful repositioning strategy, Lucozade sales took a vertical take-off

Copyright: Raja Shuja-ul-Haq (2009)

Perceptual Map Technique Used by Lucozade’s Marketing Managers

  • Healthy

Perceptual Map Technique Used by Lucozade’s Marketing Managers Healthy
Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

Copyright: Raja Shuja-ul-Haq (2009)

It was revealed from the perceptual map how Lucozade marketing managers used age (i.e. adult and child) and the health / lifestyles to start repositioning their product in a much faster growing market

Copyright: Raja Shuja-ul-Haq (2009)

Steps involved in the positioning process

Identify a set of competitive products

Identify the key product attributes

Collect information from customers / prospects on perceptions of the products and their attributes

Determine product’s position on the perceptual map (product positioning technique which has been earlier discussed)

Determine customers’ or prospects’ ideal position (s)

Examine the fit between product position and market preference

Select a positioning strategy (a strategic marketing concern)

Copyright: Raja Shuja-ul-Haq (2009)

So, where have we reached ?

Why? What? How? Where? and When?

How deep an involvement is needed?

We can’t market to everyone

We need to segment our markets

Through focused or differentiated strategies

Positioning is all about what the prospect thinks about our product

Copyright: Raja Shuja-ul-Haq (2009)

Some Recommended Literature

Jobber, D., Principles and Practice of Marketing, 3rd edition, Berkshire:

McGraw-Hill

Kolah, A., Essential Law for Marketers Oxford: Butterworth-Heinemann

Kotler, P., and Armstrong, G., Marketing: an introduction, Prentice-Hall International Edition

Philip R. Cateora & John L. Graham, International Marketing Eleventh Edition, London: McGraw-Hill

Piercy, N.F., Market-Led Strategic Change, 3rd edition, Oxford: Butterworth- Heinemann