PGP: Marketing Management: Prof. Siddharth Shekhar Singh

PGP: Marketing Management
Prof. Siddharth Shekhar Singh

Introduction
 My introduction
 Education
 Experience
 Associate Dean
 Board member
 Petronet LNG
 Dlabs
 ISBM (UK)
 Industry other:
 Johnson & Johnson
 Consulting, Startups (e.g. www.bsharpcorp.com; RVM-Zeleno)
 Teaching
 Research
 Sustainable competitive advantage
 Marketing Strategy
 CLV analysis: Acquisition, retention, upselling and cross selling, loyalty programs
 Online marketing: Customer communities, advertising and promotions, social media
 Financial impact of marketing actions (ROI)
2
Marketing Management: Class Overview
 Foundations of Marketing
 Strategic Marketing (STP)
 Segmentation
 Targeting
 Positioning
 Implementing the Marketing Strategy (4P)
 Product
 Price
 Place
 Promotion
 Focus: Deep insights into strategic issues and applications

3
Introduction: First two sessions
 Foundations of Marketing
 Marketing overview
 Customer needs
 Customer value
 Strategic Marketing (STP)

 Segmentation
 Targeting
4
What is Marketing?
5
Marketing Management
Product
IMPLEMENTING THE
MARKETING STRATEGY
(4 P)
STRATEGIC MARKETING
CUSTOMERS (STP)
6
Copyright Prof. Siddharth S. Singh, ISB
Online Sessions
 Customer needs and behavior
 What is meant by value

 Dimensions of value
 How can you craft a superior value proposition?
 What is a market?
 Product market and segmentation
 Targeting Decision
7 Copyright ©Siddharth S. Singh. Not to be used or reproduced without permission.

Customer Needs
 Example 1: Kids Toothbrush
 Example 2: Milkshake
8 Copyright Prof. Siddharth S. Singh, ISB

Customer Needs
 Existing Needs
 Currently in the minds of customers

 Can be easily expressed
 Traditional marketing methods can be used to understand these and to test new product
concepts
 Example?
All categories of new products, except New-to-the-world products,

primarily address this need

Customer Needs
 Latent Needs
 Customers do not realize today and therefore are not able to express
 Customers unwilling to express
 Examples?
New to the world products primarily address latent needs
 Estimating size of potential market is not easy with traditional

marketing research techniques

Latent Needs
 How would you find latent needs
 Empathic design
 Example: Tray of sutures
 Multiple categories for same usage occasion

Customer Value
 What is customer value?
 Example: How do you evaluate a garment before

purchasing?

Customer Value Dimensions
The perceived worth in monetary units of the benefits received by customer in exchange
for the price paid for a product offering taking into consideration the available
competitive offerings and prices
Three Dimensions of Benefits:
Economic
Functional Psychological

Examples: customer value
 Do customers perceive value? How can you create it?

 Online Education
 Value planned Vs Value realized

 www.yebhi.com comparison shopping—any issues?
 KEY: Focus on customer needs and behavior!

Creating Value for a Product/Service
How can you create value for customers?
How can value be created using social media?
Drones?

Creating Value : B to B Markets
 Customer Value Models: Johnson & Johnson (Ethicon)

Product Market
 What is a Product Market?

What is a product market?
 Traditional definition:
 Generic title: Auto market
 Physical characteristic of a product: compact, midsize
 New definition by Kotler 1997:
Product Market:
A market consists of all the potential customers sharing a particular need or want
who might be willing and able to engage in exchange to satisfy that need or want
 Examples:
 Same product different markets
 Different product same market

Market Definition 1
Sale ($ millions) 1998 1999 2001 2002 2003
Product 1 100 105 110 112 116

Product 2 85 82 84 87 86
Others 50 45 42 31 29
Total 235 232 236 230 231
% Market Share 1998 1999 2001 2002 2003
Product 1 42.5 45.3 46.6 48.7 50.2

Product 2 36.2 35.3 35.6 37.8 37.2
Others 21.3 19.4 17.8 13.5 12.6
Total 100 100 100 100 100

Market Definition 2
Sale 1998 1999 2001 2002 2003
Product 1 100 105 110 112 116
Product 2 85 82 84 87 86
Others 50 45 42 31 29
Addition 40 55 80 110 150
Total 275 287 316 340 381
% Market 1998 1999 2001 2002 2003

Share
Product 1 36.4 36.6 34.8 32.9 30.4
Product 2 30.9 28.6 26.6 25.6 22.6
Others 18.2 15.6 13.3 9.1 7.6
Addition 14.5 19.2 25.3 32.4 39.4
Total 100 100 100 100 100

Product Market: Examples
 Game console
 Vonage/Magic Jack

Product Market
 Are product markets dynamic?
 What are the implications for marketers?

Segmentation Examples
 Marriott Hotel Brands  Archetypes for Best Buy’s
Courtyard Most Valued Segments
EDITION Hotels Barry — An affluent tech
enthusiast
ExecuStay
Buzz — A young gadget fiend
Fairfield Inn & Suites
Renaissance Hotels Jill — A busy suburban Mom
Residence Inn Mr. Storefront — Owns a small

business
Ritz-Carlton
Ray — A price-conscious family
SpringHill Suites
guy
TownePlace Suites
23
Segmentation
Why segment?

Product Markets and Market Segmentation
 Segmentation:
Dividing customers into groups such that customers are

similar within group based on some set of characteristics
and different between groups
 What is the relationship between segments and

product market?

Segmentation: Tea
All tea
hot
warm
cold
© Copyright, Wessex Inc., 2012www.axcesscapon.com

Segmentation: Finer-Grained Tea
All tea
hot
unsweetened
sweetened
cold

Segmentation: Analgesic
Market Level Pain
Market
Market Segments Back Pain Headache Foot Pain Etc.
Customer Segments Migraine General Tension Etc.

Market Segmentation Matrix
Definition of segments
Customer
needs/ 5 2
required Priority
benefits 4 1 ordering
2 4
1 3
3 5

Segmentation of Female Skin-Care Market by
Age: Rank Order Results
Age-based Market Segments
Customer Need/ 14-18 19-29 30-39 40-49 50-64 65 and

Required Benefits over
Beauty 5 4 1 2 2 3
Confidence 2 2 3 3 3 4
Economy 4 5 7 7 6 5
Health 6 6 4 4 4 2
Sexual Allure 3 1 2 5 5 6
Status 1 3 6 6 7 7
Youthfulness 7 7 5 1 1 1
© Copyright, Wessex Inc., 2012; www.axcesscapon.com

Developing Market Segments
High Customer Needs First

Identification of value
Actionable segmentation
Candidate Descriptor
(Segmentation) Variables
First
Low
Low High
Identification of customers

Criteria for Good Segmentation
Differentiated
Stable Identifiable
Criteria for Segmentation
Accessible
Measureable
Appropriately-
sized
Product Markets and Segmentation
How many segments do you need?

Criteria for Defining Product Markets and
Segmentation
 Market definition is an “Art”
 Focus on customer need and behavior

 Search
 Purchase
 Use
 Disposal
 Market  Segmentation  Targeting  Positioning 4P

Criteria for Product Markets and Segmentation
 No best rule to define product market boundaries

 Managerial judgment required
 Some criteria for segmenting markets
 Demographics (age, region, gender)

 Attitudes (health foods, environment)
 Product benefit (packaging quality, strength of detergent)
 Price sensitivity
 Decision rules (wholesale-retail)
 Usage behavior (80-20)

Segmentation: Many ways …
 Can you think of ways to segment in politics?
 If you are a politician, how would you choose your

segmentation scheme?
36
Which segments to target?
37
Market Segment Attractiveness: Business Strengths
Matrix
1000
A B C
Market Segment Attractiveness
700
D E F
400
G H I
100
100 400 700 1000
Business Strengths

Targeting Market Segments: Typical Criteria for Gauging Market
Segment Attractiveness and Business Strengths Needed to Win
Market Segment Attractiveness Business Strengths

Ability to use available resources Brand value
Barriers to entry Distribution facilities

Barriers to exit Financial leverage
Customer service valued Government relations
Degree of vertical integration Liquidity
Likely competitor actions Market segment share
Market segment growth rate Marketing skills
Market segment potential Modernity of plant and equipment
Market segment size Production capacity
Potential profit margins Profitability record

Regulatory constraints Raw materials position
Social factors Sales force
Technological change Service levels

Technological expertise

Scoring the Attractiveness of a Market Segment
Step Step Description

Number
1 Identify factors The firm seeks several factors -- typically 5 to 8 --
(Market Segment according to the statement: “Given our history, objectives,
Attractiveness related) culture, management style, successes and failures, we like
to be in market segments that offer …”
2 Weight factors Weight each factor by allocating 100 points based on its
importance to the firm. Factor weights sum to 100.
3 Rate market segments Rate each market segment according to how well it
performs on each factor (1 = poor; 10 = excellent).
4 Develop Factor Scores For each segment, form individual factor scores by
multiplying the results of step 2 and step 3 for each factor.
Factor score = Weighting X Rating.
5 Develop the Market Sum the individual factor scores.

Segment Attractiveness
Score

Illustration: Assessing the Attractiveness of the Plastics
Accessories Market Segment to Sriram
Factor Sriram Plastic Accessories Segment Factor Score

Weighting Rating (1 to 10 scale) (weighting x rating)
Ability to build new strengths 10 6 60
Easy customer access 15 9 135
High market growth 20 7 140
Large potential size 20 5 100
Little regulation 10 8 80
Use excess resources 10 2 20
Weak competition 15 4 60
Total 100 595

Scoring the Firm’s Business Strengths
Step Step Description

Number
1 Identify factors For each segment, the firm selects several factors (typically 5
to 8) according to the statement: “To be successful in this
market segment, any competitor must possess the following
strengths …”
2 Weight factors Weight each factor by allocating 100 points based on its
importance for being successful in the segment. Factor weights
sum to 100.
3 Rate the firm Rate the firm according to its possession of these strengths
(1 = poor; 10 = excellent)
4 Develop Factor For each factor, form individual factor scores: multiplying the
Scores results of step 2 and step 3 for each factor. Factor score =
Weighting X Rating.
5 Develop the Sum the individual factor scores.

Business
Strengths Score

Illustration: Assessing Sriram’s Business Strengths
in the Plastics Accessories Market Segment
Factor Plastic Accessories Sriram Rating Factor Score

Segment Weighting (1 to 10 scale) (weighting x rating)
Deep pockets 10 9 90
Fast-moving organization 5 3 15
Good R&D 25 7 175
High-quality service 15 6 90
In-place distribution 20 5 100
Low-cost operations 10 4 40
Well-trained sales force 15 9 135
Total 100 645

Strategic Position Analysis: Market Segment
Attractiveness — Business Strengths Matrix
1000
Z
A B C
Market Segment Attractiveness
700
D E X F Y
400
G H I
100
100 400 700 1000
Business Strengths

So far..
 Customer needs
 What is meant by value?
 Different dimensions of value
 What is the role of marketing?
 What is a product market?
 What is segmentation?
 Which segments to target?

Questions?

PGP: Marketing Management: Prof. Siddharth Shekhar Singh

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PGP: Marketing Management

Prof. Siddharth Shekhar Singh

 Focus: Deep insights into strategic issues and applications

 Strategic Marketing (STP)

 What is meant by value

7 Copyright ©Siddharth S. Singh. Not to be used or reproduced without permission.

 Example 1: Kids Toothbrush

8 Copyright Prof. Siddharth S. Singh, ISB

 Currently in the minds of customers

All categories of new products, except New-to-the-world products,

9 Copyright Prof. Siddharth S. Singh, ISB

New to the world products primarily address latent needs

 Estimating size of potential market is not easy with traditional

10 Copyright Prof. Siddharth S. Singh, ISB

 How would you find latent needs

 Multiple categories for same usage occasion

11 Copyright Prof. Siddharth S. Singh, ISB

 What is customer value?

 Example: How do you evaluate a garment before

12 Copyright Prof. Siddharth S. Singh, ISB

Three Dimensions of Benefits:

13 Copyright Prof. Siddharth S. Singh, ISB

 Do customers perceive value? How can you create it?

 Value planned Vs Value realized

 KEY: Focus on customer needs and behavior!

14 Copyright Prof. Siddharth S. Singh, ISB

How can you create value for customers?

How can value be created using social media?

15 Copyright Prof. Siddharth S. Singh, ISB

 Customer Value Models: Johnson & Johnson (Ethicon)

16 Copyright Prof. Siddharth S. Singh, ISB

 What is a Product Market?

17 Copyright Prof. Siddharth S. Singh, ISB

 New definition by Kotler 1997:

18 Copyright Prof. Siddharth S. Singh, ISB

Sale ($ millions) 1998 1999 2001 2002 2003

Product 1 100 105 110 112 116

% Market Share 1998 1999 2001 2002 2003

Product 1 42.5 45.3 46.6 48.7 50.2

19 Copyright Prof. Siddharth S. Singh, ISB

% Market 1998 1999 2001 2002 2003

20 Copyright Prof. Siddharth S. Singh, ISB

21 Copyright Prof. Siddharth S. Singh, ISB

 Are product markets dynamic?

 What are the implications for marketers?

22 Copyright Prof. Siddharth S. Singh, ISB

Renaissance Hotels Jill — A busy suburban Mom

Residence Inn Mr. Storefront — Owns a small

24 Copyright Prof. Siddharth S. Singh, ISB

Dividing customers into groups such that customers are

 What is the relationship between segments and

25 Copyright Prof. Siddharth S. Singh, ISB

© Copyright, Wessex Inc., 2012www.axcesscapon.com

© Copyright, Wessex Inc., 2012www.axcesscapon.com

Market Segments Back Pain Headache Foot Pain Etc.

Customer Segments Migraine General Tension Etc.

© Copyright, Wessex Inc., 2012www.axcesscapon.com

© Copyright, Wessex Inc., 2012www.axcesscapon.com

Customer Need/ 14-18 19-29 30-39 40-49 50-64 65 and

© Copyright, Wessex Inc., 2012; www.axcesscapon.com

High Customer Needs First

© Copyright, Wessex Inc., 2012www.axcesscapon.com

Criteria for Segmentation