Developing Marketing Strategies.

Nov 13th, 2009

This section covers:

•Segmentation, Targeting and Market Positioning

•Developing new products

•Brand Management

•Managing products over the lifecycle

Chaps 7 & 8 of book

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Learning Objectives

Know how both B2B and consumer markets can be broken down into smaller, more manageable groups of similar customers.

Understand the effects on the marketing mix of pursuing specific segments. – 4 Ps

Understand the potential benefits and risks of segmentation.

Review New Product Development and the Product Lifecycle

Understand why branding is important for product success

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Segmentation Defined

Segmentation is the art of discerning and defining meaningful differences

between groups of customers to form the foundations of a

more focused marketing effort.

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Mass MarketNiche MicroMarkets The individual

Segmentation Continuum

Market Segmentation

Market segmentation is the top down process of grouping customers in markets with some similarities into smaller, more homogenous segments. But what are the benefits of segmentation?

better customer analysis and service; better competitor analysis; more effective resource allocation; better strategic marketing planning.

What market segment is Red Bull aimed at? See Pg 197 book – they knew their customers before designing marketing mix – what if you get it wrong?

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Stages of Segmentation for B2B Markets

Identify subgroups within the whole market that share common general characteristics (macro segments).

Select target segments from macro segments based on differences in specific buying characteristics (micro segments).

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B2B Segmentation Bases

Macro Size

Location Usage rate

Micro Product

Applications Technology

Purchasing and decision-making

processes Buyer-seller

relationships

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Consumer Segmentation Bases

1. Geographic

3.Geo-demographic

6. Multi-variable

5. Behaviour 4. Psychographic

2. Demographic

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Consumer Segmentation Similar to B2B segmentation, except:

Consumer segments tend to be larger; More difficult to get close to buyer; More emphasis on lifestyle and context.

1. Geographic Segmentation Example: Instant Hot Chocolate

Ideal for UK market (homes equipped with kettles, nice bedtime drink, or substitute for tea.

Less good for French market (kettles uncommon, norm of making hot chocolate is with milk rather than with water).

Wine Sales – North or South of England?

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2. Demographic SegmentationOn the basis of: Age Gender Race Income Occupation Social status Family structure

Also: 3. Geo-demographic SegmentationGeo-demographic Segmentation exists. It combines geographic and demographic analysis. Example – targetting teenagers in a specific location

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4. Psychographic Segmentation

This is Lifestyle segmentation

Categories are: Activities Interests Opinions Demographics

Example: Quorn targets vegetarians with meat substitutesThe Green Movement

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Lifestyle Orientations in the US

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Why Use Psychographic Segmentation?

To define a target market; To create a new view of the market; To position the product; To better communicate product

attributes; To develop overall strategy; To market social and political issues.

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5. Behaviour Segmentation

On the basis of: End use Benefits sought Usage rate Loyalty Attitude Buyer readiness

Example. Usage Segmentation in the Soup Market:Dinner party starterWarming snackMeal replacementRecipe ingredientEasy office lunch

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6. Multivariable Segmentation It is unlikely that any one segmentation variable

will be used absolutely on its own. It is more common to use a multivariable

segmentation approach. This includes defining a portfolio of relevant

segmentation variables depending on the market in question. What would you suggest for garden centres and /or

golf courses?

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Advantages & Disadvantages of Segmentation

1. Defines the market for further analysis

2. Allows creation of a customised marketing mix

3. Aids in assessing potential demand

4. Aids in identifying competitors

5. Aids in positioning6. Aids in identifying

opportunities

1. Increased costs2. Increased number of

products3. False segmentation4. Collecting & storing

personal data may violate privacy

5. May decrease brand loyalty

6. Some practices considered unethical

7. Danger of Stereotyping

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Principles of Marketing and Best Practice (2005) Czionkta et al

E

X

A

M

P

L

e

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Post-Segmentation Targeting

Undifferen-tiated

Targeting

Differen-tiated

Targeting

Concen-trated

Targeting

Three main Targeting Strategies

After segmenting your market, you will have to decide which and how many segments should be targeted.

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1. Undifferentiated Strategy

Marketing mix The market

To have the same marketing mix for the whole mass market, e.g. washing powder.

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2. Differentiated Strategy

Marketing mix 1 Segment 1

Marketing mix 2

Marketing mix 3

Segment 2

Segment 3

To have a different marketing mix for each of the key customer segments that have been identified, e.g. Cadbury (immediate eat, home stock, kids, gifts, Easter, Christmas).

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3. Concentrated Strategy

Marketing mix 2 Segment 2

One marketing mix is developed & directed toward only one very profitable market segment.Suitable small company with limited resources: smarthomes.ie

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Important Criteria for Successful Segmentation

Distinctiveness

Accessibility

Defendability

Tangibility

Only if those factors can be satisfied, it is worthwhile to pursue a different segment.

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Is the segment distinguishableIs the segment distinguishable

Does the segment exist over time and can money be made

Can you reach it within budget?

Will competition react?

Age of the product General Company Profitability Market share vis-à-vis competitors The competition itself The product itself The general market

This reminds us of the importance to monitor continuously the Macro- and Micro-Business Environment.

External Factors Affecting Success of Segmentation

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Example: Positioning - Computers

Which consumer segment buys which type of computer?

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Positioning Strategies

On the basis of: • Specific features• Specific usage occasions• Specific user groups• Head to head with key competition• Service superiority

• Note: that you might have to engage in repositioning your product regularly.

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New Product Development

Remember what a Product is!

- A car isn’t just a mode of transport…it’s a lifestyle choice

- A restaurant isn’t just a place to visit if you’re hungry…why can some restaurants get away with charging so much?

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Product Classifications

Convenience Goods – unplanned

Shopping Goods

Speciality Goods

Unsought Goods

Business Products

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New Product Development Follows a Framework

Product Line Strategy

Product Strategy

Identify Consumer

needs

Generate Ideas

Feasibility

Concept Study•Generation •Screening•Business Case

Development•Specifications •Prototype•Product Test•ManufacturingDevelopment•Pilot Production

CommercializationMaintenancePostdevelopment

Review

Knowledge

Source: Czinkota et al. Marketing Best Practices, pg.253

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Phases in NDP

1. Idea Generation2. Screening3. Concept Development & Testing4. Marketing Strategy Development5. Business Analysis6. Product Development7. Test Marketing8. Commercialisation

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Brand Management

Attributes that make up a brand can be real or illusory, rational or emotional, tangible or intangible

A brand is a word or group of letters which can be vocalised (3M, U2)

The symbol or design is the brand mark

Can you think of any examples of brands that have been abused by copycat companies?

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Branding Decisions

Good brandname, trademark or logo has 4 important characteristics.

1. Attract Attention2. Be memorable3. Help communicate the positioning of the

product4. Distinguish the product from competing

brands

Good brand should also develop brand equity (a monetary value that can be put on the brand)

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Brand Strategies

Individual vs. Family Branding

Individual – Lever Brothers:

Family - Coke

Note: Increasing success of retailers’ own brand. Now over 5% of Irish grocery market and growing.

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Managing Products over the lifecycle

Already touched on this in previous lectures – Page 264 of book

Introduction, Growth, Maturity & Decline

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How do customers react at different lifecycle stages?

Innovators: - 2.5% tend to be younger & higher in social status and better educated – iPhone??

Early Adopters: 13.5% of potential adopters, enjoy the prestige & respect of owning new product

Early Majority: 34% seek the opinions of the aforementioned and spend time deciding whether to try or not

Late Majority: 34% is less cosmopolitan and responive to change than any of the previous

Laggards: 16% - laggards tend to be older, conservative, low socioeconomic status and suspicious of change.

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Next Week

Marketing Management