SEGMENTING; TARGETING & POSITIONING

B2B MARKETING EMBA 2K12

MARKET SEGMENTION“Process of dividing a market into groups of customers who have similar requirements for a product or service offering”

In business-to-business marketing, segments are clusters of firms that are distinct from others in terms of what they need and buy as well as how they buy

PROCESS OF MARKET SEGMENTATION

Conducting marketing research to collect data on buying firms and competition

Identify MACROSEGMENTS based on analysis of data

Select MACROSEGMENTS which satisfy company objectives & resources

Evaluation MACROSEGMENTS based on differences in Buying Behavior

If No, identify & select meaningful MICROSEGMENTS

Profile target segments on buying organization & DMU characteristics

If Yes, select the target macro segments based on specific criteria

Stop, and use the Macro segments as target segments

BENEFITS, LIMITATIONS & REQUIREMENTS OF MARKET SEGMENTATION

Market segment cannot be practiced effectively in business marketing because of difficulty in grouping the industrial customers into market segments. Many business & individuals with different background in decision Process. Despite the difficulties, there are distinct BENEFITS in Market segmentation.

BENEFITS

Enables the industrial marketer to compare marketing opportunities of different market segments by studying the customer needs and potential, competition and satisfaction levels of customers in each market segments

Industrial firms with availability of adequate resources can develop separate marketing strategy for different segments

Firms with less resources can succeed by concentrating on a few market segments

The budget allocation of resources can be done effectively to various segments, and hence, marketing resources can be used more efficiently

LIMITATIONS Not always beneficial or practical, particularly when

market is too small Increase in marketing expenses such as inventory

carrying cost, marketing expenses, advertising costs, transportation cost etc.

Existence of great differences in buying practices, customer characteristics, product applications, and benefits sought by different members of buying center

Despite the difficulties, there are distinct BENEFITS in Market segmentation

REQUIREMENTSMeasurability: Can the size, growth and buyer characteristics be measured? Accessibility: Can the segments be identified, reached and served effectively with the firms marketing Substantiality: Are the segments large enough in terms of the sales and profit potential to serve? Compatibility: Do the company’s marketing and business strengths match the present and expected competitive and technological state of market.

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APPROACHES TO MARKET SEGMENTATIONNested Approach

• Stresses segmentation according to the amount of investigation required to identify and evaluate different criteria.

• Layers of the nest begins with organization demographics

• More specific customer characteristics are nested inside the broader organizational basis

BASES FOR SEGMENTING BUSINESS MARKETBusiness Market can be segmented on several bases, broadly classified into two major categories:

MACRO SEGMENTATION MICRO SEGMENTATION

MACROSEGMENTATION

MACROSEGMENTATION: consists of identifying macro variables on the basis of industry characteristics such as type, size geographic location or

product application.

MACROSEGMENTATION VARIABLES

VARIABLES1. Type of Industry/Customer

2. Company Size, Usage rate

3. Customer Location, Geographic area

4. End-use or application, benefits of products

EXAMPLESType of Industry: Mining, Chemical, rubber, textile etc.. Type of Customer: includes government, commercial and institutional

Size of companies: Based on sales potential (or Usage), market is segmented by (A, B, & C) or large, medium and small size customers

Geographical Areas: near to factory or in various regions.

Specific end-uses or application: Aluminum for doors, frames, electrical control panels, electronic equipments, Utensils, etc

MICROSEGMENTATION

MICROSEGMENTATION: are homogeneous groups of customers within the macro segments. Based on the

purchasing decisions

MICROSEGMENTATIONVARIABLES1. Buying Situations

2. Organizational capabilities

3. Purchasing Policies

4. Purchasing criteria

5. Personal Characteristics

EXAMPLESShould we serve customers who need more information, help or decision making process from suppliers?

Should we concentrate on customers who need financial support (more credit), more services (prompt or quick deliveries), or Technical support?

Should we focus on customers who prefer competitive bidding, market based negotiated prices, turn-key contracts or service contracts?

Should we serve the customers who seek Quality, Service or Price?

Should we focus on the customers based on the personal characteristics of Buying-Center members such as risk-takers, Risk-avoiders?

TARGET MARKETINGEVALUATING MARKET SEGMENTS based on:

Size and Growth Profitability Analysis Competitive Analysis Company Objectives & Resources

SIZE AND GROWTH Company needs to find out Size of each market segment. Current and future market potential should be identified

PROFITABILITY Three elements involved in analyzing profitability of each

potential segment. • Market Potential• Sales Forecast• Profitability

COMPETITIVE ANALYSISProfit Potential and ability of the industrial marketer to penetrate a particular market segment depends on a careful analysis of the strengths and weaknesses of the existing &/or potential competitors

To be identified in each segment in each of the following areas

• Manufacturing • R&D -Finance • Technical Service • Product Quality • Delivery Performance • Sales Force • Advertising • Distribution • Technology • Organization & Management reputation

OBJECTIVES & RESOURCES Industrial Marketer should ask whether each potential segment is

in line with the company’s objectives.

Analysis of resource or strengths to be in line with the success factors of each segment

FACTORS IN ASSESSING SEGMENT ATTRACTIVENESS

Size of segment Growth rate of segment Intensity of unmet need(s) Reach ability of segment through

communication channels Readiness of segment to seek

and adopt a solution Likelihood of competitive

intensity Sufficiency of channel reach Likely value contribution by

channel(s) Match between segment needs

and supplier’s strengths Differentiability of supplier’s

offering Opportunity to achieve strategic

goal by addressing segment Opportunity to achieve learning

goal by addressing segment

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A USEFUL TOOL FOR ASSESSING MARKET SEGMENTS: SEGMENT RATING CHART

WEIGHT RATING (0-10) TOTAL

Market attractiveness factors

Customer needs and behavior .5 10 5.0 Segment size and growth rate .3 7 2.1 Macro trends .2 8 1.6 Total: Market attractiveness 1.0 8.7 Competitive position factors Opportunity for competitive advantage .6 7 4.2 Capabilities and resources .2 5 1.0 Industry attractiveness .2 7 1.4 Total: Competitive position 1.0 6.6

TARGET MARKET STRATEGIES CONCENTRATED MARKETING DIFFERENTIATED MARKETING UNDIFFERENTIATED MARKETING

CONCENTRATED MARKETING Focusing all the marketing efforts on a single or relatively few,

carefully-defined segment(s). Very narrow range of products/service accompanied by high

quality, high price & highly selective promotional & distribution strategies.

May be done by the companies with limited resources. Involves more risk as the market potential in chosen segment

can decline or big competitor may invade

DIFFERENTIATED MARKETING Targeting several segments whose needs, product

usages or market responses are appreciably different Developing separate marketing strategies/plans for

each of its chosen segments Despite of higher costs the aim is to achieve greater

sales volume and stronger position in the market

UNDIFFERENTIATED MARKETING Can sometimes be due to lack of effective

segmentation Developing a single marketing plan for the entire

market Despite of higher costs the aim is to achieve greater

sales volume and stronger position in the market

STRATEGIES FOR SELECTINGTARGET MARKETS

ConcentratedStrategy

UndifferentiatedStrategy

Multi segmentStrategy

POSITIONING STRATEGIES

Positioning is defined as the distinct place a product/service occupies in the minds of the

target customers relative to competing products/services

PRODUCT POSITIONING STRATEGY

Introduction

• Product Positioning

• The way a product is defined by customers• Product Differentiation

• Involves meaningful differences in the product, services offered, personnel, etc.

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WHY STRATEGICALLY POSITION PRODUCTS AND SERVICES? So they are perceived as different from competitors in ways that

represent value to customer segments

As a tool to help marketers visualize the customer’s perceptions of the competitive offerings available according to various variables (axes) of importance

PRODUCT POSITIONING STRATEGY

Approaches to Positioning

• Technology• Quality• Price• Distribution• Image• Service

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PRODUCT POSITIONING STRATEGYSuccessful Positioning

• Consider what position the firm presently owns.• Decide what position the firm wants to own.• Decide who the firm must outflank to gain that position.• Consider if the firm has the necessary resources.• Consider if the firm is committed to achieving the objective.• Determine if the firm can create a marketing mix to achieve the

desired position.

CRITICAL COMPONENTS OF POSITIONING STATEMENT Target: mentions the characteristics of the target customers in

which the supplier is interested

Offering Concept: states the absolutely necessary attributes of the market offering for target customer

Value Proposition: indicates the difference of the market offering compared to the next-best-alternative offering that are valuable to the customers

CRITERIA TO SELECT THE POSITIONING STATEMENTS FROM A NUMBER OF ALTERNATIVE POSITION STATEMENTS

Target: mentions the characteristics of the target customers in which the supplier is interested

Offering Concept: states the absolutely necessary attributes of the market offering for target customer

Value Proposition: indicates the difference of the market offering compared to the next-best-alternative offering that are valuable to the customers