session 2 & 3 market, segments & customer value group3
TRANSCRIPT
3
Market Market Segments Target Market Niche Market Mass Marketing Customization Mass Customization Forms of Competition
– Direct– Indirect
5
Markets And Competitive Space
Markets and Strategies
Product-Market Scope and Structure
Describing and Analyzing End-Users
Analyzing Competition
Developing a Strategic Vision about the Future
Market Size Estimation
6
Markets And Competitive Space
The Challenges ―
Markets are increasingly complex, turbulent, and interrelated.
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Identify shifts in value requirements
Understand competitors’ positioning
Guide targeting and positioning
decisions
7
Markets And Strategies
Markets and Strategies are
Interlinked
Forming a Shared
Vision
Value Migration Challenges
8
Market changes often require altering strategies
Forces of change create both market opportunities and threats
Inherent danger in faulty market sensing
Markets Impact Strategies
9
Customers shift purchasing to new business designs with enhanced value offering
Beware of disruptive technologies
Market sensing and organizational learning are essential
Value Migrations
10
Product-market Scope And Structure
Matching Needs with Product Benefits
Product-Market Boundaries and Structure
Forming Product-Markets for Analysis
The Changing Composition of Markets
11
Matching Needs with Product Benefits
A product – market matches people with needs to the product benefits that satisfy those needs
“A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”*
12
Product – Market Boundaries and
Structure Determining Product-Market Structure
• Start with the generic need satisfied by the product category of interest to management
• Identify the product categories (types) that can satisfy the generic need
• Form the specific product – markets within the generic product – market
Generic Product-type Product Variants
13
SUPER MARKETS
MICROWAVEOVENS
CONVENIENCESTORES
TRADITIONAL RESTAURANTS
Illustrative Fast-Food Product-Market
Structure
FAST-FOOD MARKET
14
Forming Product – Markets for Analysis
Factors influencing product – market boundaries:
Purpose of analysis
Changing composition of markets
Extent of market complexity
15
The Changing Composition of Markets
Change due to new technologies and emerging competition
Consider existing and emerging markets
Identify alternative ways to meet needs
Extend product-market analysis beyond industry boundaries (e.g. Fast-foods)
16
Extent of Market Complexity
Three characteristics of markets:
– 1. Functions or uses of the product
– 2. The enabling technology of the product
– 3. Customer segments in the product-market
17
Illustrative Product – Market Structure
•Generic Product Class
•Product Type
•Variant A
Regular•Variant B
•Brands
Food and beveragesfor breakfast meal
Cereals
Ready to eat
NaturalPre-sweetened
Life
Nutritional
Special KProduct 19
18
Defining And Analyzing MarketsDefine Product-Market
Boundaries and Structures
Identify and Describe End-Users
Analyze Industry and Value Added Chain
Evaluate Key Competitors
Forecast Market Size and Growth Trends
19
Identifying andDescribing Buyers
HowBuyersMake
Choices
BuildingCustomerProfiles
EnvironmentalInfluences
DESCRIBINGAND
ANALYZINGEND-USERS
20
Identifying and Describing End-Users Illustrative buyer
characteristics in consumer markets: Family size, age,
income, geographical location, sex, and occupation
Illustrative factors in organizational markets: Type of industry Company size Location Type of products
21
How Buyers Make Choices
BUYING DECISION PROCESS:
– Problem recognition
– Information search
– Alternative evaluation
– Purchase decision
– Post-purchase behavior
22
Environmental Influences
External factors influencing buyers’ needs and wants: Government, social
change, economic shifts, technology etc.
These factors are often non-controllable but can have a major impact on purchasing decisions
23
Building Customer Profiles
Start with generic product – market
Move next to product- type and variant profiles >> increasingly more
specific
Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)
24
Analyzing Competition
1.1. Define Industry Structure and
Characteristics
2. Identify and
Describe Key
Competitors
5. IdentifyNew
Competitors
3. Evaluate Key
Competitors
PRODUCT-MARKET
STRUCTUREAND
MARKETSEGMENTS4. Anticipate
Actions byCompetitors
25
Examples of Levels of Competition
Diet-RiteCola
Diet Pepsi
Diet Coke
Product from competition:
diet colas
Regular colas
Diet lemonlimes
Lemon limes
Fruitflavored
colas
Product categorycompetition:soft drinks
Bottlewater
Wine
Beer
Coffee
Juices
Generic competition:beverages
Baseballcards
FastFood
VideoGames
IceCream
Budget competition:food & entertainment
26
Industry Analysis
Industry size, growth, and composition
Typical marketing practices
Industry changes that are anticipated (e.g. consolidation trends)
Industry strengths and weaknesses
Strategic alliances among competitors
27
Defining Industry Structure &
Characteristics
Industry FormIndustry EnvironmentCompetitive Forces
ValueAddedChain
SUPPLIERS
PRODUCERS
WHOLESALERS/ DISTRIBUTORS
RETAILERS/DEALERS
CONSUMER/ ORGANIZATIONAL
END USERS
28
Competitive Forces
Porter’s 5 competitive forces:
Rivalry among existing firms.
Threat of new entrants.
Threat of substitute products.
Bargaining power of suppliers.
Bargaining power of buyers.
29
Key Competitor Analysis
Business scope and objectives
Management experience, capabilities, and weaknesses
Market position and trends Market target(s) and
customer base Marketing program
positioning strategy Financial, technical, and
operating capabilities Key competitive advantages
(e.g., access to resources, patents)
Also via Perceptual Mapping
30
Extent of Market Coverage
CustomerSatisfaction
CurrentCapabilities
PastPerformance
Competitor Evaluation
31
Developing A Strategic Vision About The Future
Industry Boundaries Blurring and Evolving
Competitive Structure and Players Changing
Value Migration Paths
Product Versus Business Design Competition
Firms are Collaborating to Influence Industry Standards
32
Market Size Estimation
UnrealizedPotential
CompanySales
Forecast
IndustrySales
Forecast
Market PotentialEstimate
Product-Market Forecast Relationships (area denotes sales in $’s)
33
0
100
200
300
400
500
600
700
800
900
Sales (in 1000sof units)
2001 2002 2003 2004 2005 2006 2007 2008
MarketPotentia
l
Sales Forecast
Company XYZ Sales Forecast
Product-Market Forecast Relationships for Industrial Painting
Units
36
Strategic Market Segmentation
Segmentation and market-driven strategy
Identifying market segments Forming segments Finer segmentation strategies Selecting the segmentation
strategy
37Segmentation and Market-Driven StrategySEGMENTS
VALUE OPPORTUNITIES
CAPABILITIES/ SEGMENT MATCH
TARGET(S)
POSITIONING STRATEGY
38From Mass Markets to Micro Markets
OLD NEW
CONSUMERS Passively receive Empowered media userswhatever TV control and shape contentnetworks thanks to TiVo, iPod andbroadcast Internet
ASPIRATIONS To keep up with To standout from thethe crowd crowd
TV CHOICE Three networks Hundreds of channelsplus maybe a plus video on demand PBS station
MAGAZINES Age of the big Age of the special interestglossies: Time, magazine for every ageLife, Newsweek and affinity group
ADS Everyone hums Talking to a group of the Alka-Seltzer one, ads go everjingle narrower
BRANDS Rise of the big, Niche brands, productubiquitous brands extensions and massfrom Coca-Cola customization mean manyto Tide product variations
39
Identifying the Health & Beauty Supplies Market Segments
Level ofLevel ofCompetitionCompetition
Generic
ProductType
ProductVariant
Product Product DefinitionDefinition
Health &Beauty
Aids
ShavingEquipment
ElectricRazors
IllustrativeIllustrativeCompetitorsCompetitors
ConsumerProduct
Companies
Gillette, Remington,
Bic
Braun,Norelco,
Remington,Panasonic
Need/WantNeed/WantSatisfiedSatisfied
Enhancement
of Health & Beauty
Shaving
ElectricShaving
40
Market Segmentation Activities and
Decisions
Market to beSegmented
Decide Howto Segment
FormSegments
FinerSegmentation
Strategies
StrategicAnalysis
of Segments
42
PurchaseBehavior
Characteristicsof People/
Organizations
UseSituation
Buyers’ Needs/
Preferences
Segmentation Variables
43
Illustrative Segmentation Variables
Characteristicsof people/organizations
ConsumerMarkets
Industrial/OrganizationalMarkets
Age, gender,income,family size,lifecycle stage,geographiclocation,lifestyle
Type of industry,size, geographiclocation, corporateculture, stage ofdevelopment, producer/intermediary
Use situation Occasion, importance ofpurchase, priorexperience withproduct, userstatus
Application, purchasingprocedure(new task, modifiedrebuy, straightrebuy
Buyers’ needs/preferences
Brand loyaltystatus, brandpreference, benefits sought,quality, pronenessto make a deal
Performancerequirements, brandpreferences, desiredfeatures, servicerequirements
Purchasebehavior
Size of purchase,frequency ofpurchase
Volume, frequencyof purchase
44
Requirements for Segmentation
SegmentationRequirements
Responsedifferences
Identifiablesegments
Actionablesegments
Favorablecost/benefit
Stabilityover time
45Approaches to Segment
IdentificationIDENTIFIERS
OF CUSTOMER GROUPS
CUSTOMER RESPONSEPROFILE
Characteristics of People and Organizations
Use Situation
Buyers Needs and Preferences
Purchase Behavior and Loyalty
Can use:
•Experience & Available information
•Cross classification analysis
•Database segmentation
Can use:
•Cluster Analysis
•Perceptual Maps
47Illustrative Consumer
Perception Map
LowQuality
HighQuality
Expensive
Inexpensive
GROUPI
GROUPV
GROUPIII
GROUPII
GROUPIV
• Brand E
• Brand D
• Brand C
• Brand B
• Brand A
48
Finer Segmentation Strategies
Logic of finer segments– customized offerings– diverse customer base– close customer relationships
Finer segmentation strategies– microsegmentation– mass customization– variety-seeking strategy
49
Selecting The Segmentation
Strategy Deciding how to segment Strategic analysis of market
segments– Customer analysis– Competitor analysis– Positioning analysis– Estimating segment attractiveness– Segmentation “fit” and implementation
50
CustomerAnalysis
PositioningAnalysis
Financial andMarket
Attractiveness
CompetitorAnalysis
Strategic Analysis of Market Segments
51Segment Financial and Market
Attractiveness
Estimated($ million)
Segment
X Y Z
Sales* 10 16 5
Variable costs* 4 9 3
Contribution margin* 6 7 2
Market share ~ 60% 30% 10%
Total segment sales 17 53 50
Segment position:
Business strength High Medium Low
Attractiveness # Medium Low High
*For a two-year period.~Percent of total sales in the segment.#Based upon a five-year projection.
52
Segmentation “Fit” for Implementation
Segment Attractivenessand Internal Compatibility
Internal Compatibility
Market SegmentAttractiveness
High Low
High
Low
Attractive segmentsthat match with
companycapabilities
Attractive segmentsbut with poor match
with companycapabilities
Unattractive segmentsthat do not match withcompany capabilities
Unattractive segmentsbut with match to
companycapabilities
54
Continuous Learning About Markets
Market orientation and organizational learning
Marketing research information Information systems Marketing intelligence systems
and knowledge management Ethical issues in collecting and
using information
55
Market Orientation and Organizational
Learning
Market orientation perspective includes all relevant sources of knowledge and ideas
Characteristics of the learning organization
Learning and competitive advantage
56
Learning About Markets
Open-MindedInquiry
Keeping andGaining Access
to PriorLearning
SynergisticInformationDistribution
MutuallyInformed
Interpretations
57
A Framework for Market Sensing
Probability of the Event Occurring
Effect of theEvent on theCompany*
High LowMedium
1
2
3
4
5
6
7
* 1=Disaster, 2=Very bad, 3=Bad, 4=Neutral, 5=Good, 6=Very good, 7=Ideal
UtopiaField ofDreams
Things toWatch
DangerFutureRisks
58
Types of Marketing Information
Marketing research studies Standardized information
services Management information
systems Database systems Decision support systems Customer relationship
management (CRM) systems Competitor intelligence systems
59
Strategies for Obtaining Information
Strategyalternatives
Use standardizedresearch services
Collect existing information
Conduct research study
Internal Data
Published information
Subscription
Single purchase
Exploratory
Full-scale
60Advantages and Limitations
of Questioning Methods Advantages Limitations
Personal Interviews
Most versatile and High cost flexible Possibility of interviewer Long questionnaires bias handled more easily Possibility of cheating by Presence of interviewer interviewer due to lack allows more flexibility of supervision in procedure Project time often lengthy More enjoyable for respondents Fewer refusals
Telephone Interviews
Fewer interviewers needed More noncommittal Relatively inexpensive answers Rapid method of data Some households collection overrepresented Can reach large number of Lengthy and detailed households questions often not More control over interviewers feasible
Mail surveys
Higher-quality information Questionnaire cannot be Better for collecting changed information on possibly Complex embarrassing subjects Can be completed by Relatively cheaper to conduct person other than intended No interviewer bias Follow-up expensive
Response often slow in coming
61
Special Research StudiesProblem Definition
Information Required
Research Method
Sampling Plan
Questionnaire Design
Data Collection
Analysis and Report
62
1. Client Would you recommend this supplier?
2. Supplier Do you have sufficient funds for this project?
3. What parts of the project will be subcontracted, and how do you manage subcontractors?
4. May I see your interviewer’s manual and data entry manual?
5. How do you train and supervise interviewers?
6. What percentage of interviews are validated?
7. May I see a typical questionnaire?8. Who draws your samples?9. What percentage of your data entry is
verified?10. Ask Managers: What do you think
about this supplier?
Screening A NewResearch Supplier
63
Impact of the Internet on Marketing Costs &
Availability Online Surveys
– Fast– Inexpensive– Limitations in population coverage– Resistance to excessive Web communications
Customer feedback and peer-to-peer Web communications
Monitoring customer Web behavior
65Marketing Intelligence
and Knowledge Management
Market sensing does not rely on hard data alone– intelligence from publications, sales
calls, customer visits, social contacts, Internet, rumor
Knowledge management Role of the Chief Knowledge Officer Leveraging customer knowledge
– creating “customer knowledge development dialogues”
– operating enterprise-wide “customer knowledge communities”
– capturing customer knowledge at the point of customer contact
– management commitment to customer knowledge