“in business-to-business marketing, segments are clusters of firms that are distinct from others...
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Ch. 7: Segmenting, Targeting, and Positioning
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Market Segmentation
“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”
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Targeting
“Producing an offering that meets the needs of customers in the segment better than the competitor’s, and reach segment through communication and distribution channels so that customers realize the superior value offered.”
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Choosing Segments
Marketers choose segments to target by:
Measurability Accessibility Substantiality Actionability
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Effective Segments
“An effective segment has members that homogeneous within the segment and those members as heterogeneous as possible with the members of other segments.”
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Positioning
Relationship of product and marketing activities
In comparison to other segment participants must demonstrate superior value to consumers
Positioning is in the mind of consumer
Resources often managed to ensure successful positioning
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Strategies for Market Segments
Competitive advantage through low cost position
Competitive advantage through differentiated offering
Competitive advantage through providing an exact product to a niche market
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Business to Business Segmentation
Common Basis
Product Offered
Buying Behavior
Geographic Region
Size of Account
Size of Company
Technology Used
Industry of Customer
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Segments and The Value Chain – Exhibit 2a
SegmentOffering
abcd
1
2
3
4
Subgroupswith differingneeds
Key elements of value chaincontributing to offering – complicated chain of activities because of complicated offering
Key elements of offering addressing subgroups in the segment –complex offering
Several sub-groups in the market segment due to differing needs
a
bc
d
Value Chain
Value Enabling– Infrastructure– People
Management– Technology
Development & Mgt
– Resource Acquisition
Value Creating– Input
Logistics– Operation
s– Delivery
Logistics– Marketing– Service
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Segments and The Value Chain – Exhibit 2b
1
2
Value Chain
Offering Segment
Key elements of value chaincontributing to offering –
simpler chain of activities because of simpler offering
Fewer key elements of offering addressing subgroups in the segment
Fewer sub-groups in the market segment due to more homogeneous needs
ab
a
b
Value Enabling– Infrastructure– People
Management– Technology
Development & Mgt
– Resource Acquisition
Value Creating– Input
Logistics– Operation
s– Delivery
Logistics– Marketing– Service
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Analytical Approach to Segmentation
Produces to sets of data: Determine relative size and
growth potential of segments Determine individual segment
needs and buying behavior
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North American Industry Classification System (NAICS)
Industry classifications designed and used by the U.S. government, Canada and Mexico.
Visit: http://www.census.gov/naics/ for full description.
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North American Industry Classification System (NAICS)
11 Agriculture, Forestry, Fishing and Hunting
53 Real Estate and Rental and Leasing
21 Mining, Quarrying, and Oil and Gas Extraction
54 Professional, Scientific, and Technical Services
22 Utilities 55 Management of Companies and Enterprises
23 Construction 56 Administrative and Support and Waste Management and Remediation Services
31-33
Manufacturing 61 Educational Services
42 Wholesale Trade 62 Health Care and Social Assistance
44-45
Retail Trade 71 Arts, Entertainment, and Recreation
48-49
Transportation and Warehousing
72 Accommodation and Food Services
51 Information 81 Other Services (except Public Administration)
52 Finance and Insurance 92 Public AdministrationSource: www.census.gov/eos/www/naics/index.html
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Innovation Translation
Look for new customers Verify existence of segment
o Do so by transferring technology offering of the first customer to other customers
Involves exploratory interaction with current and prospective customers
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Factors in Assessing Segment Attractiveness
Size of Segment Growth Rate of
Segment Intensity of Unmet
Need(s) Reach ability of
Segment through Communications 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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Logical Analysis of Market Segments
Setting Goalso Achieving sales level, Growing at a
desirable rate, And maybe other tangible goals
Defining Segmentso Measures that reflect differences in
need
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Segment Attractiveness for Hypothetical Example
Attributes Segments
Scores on 5-point scale*
Segment 1: Major
Turnaround
Segment 2: Stopping
Deterioration
Segment 3: Competitive
Improvement
Segment 4: Specific Area Improvement
Potential size year 2010 (in $million)
2$195.0
3$390.0
4$585.0
4$975.0
Growth, percent increase by 2012
4100%
4100%
1(50%)
5150%
Need strength5 4 3.5
3.5(High
variance)Competitive strength 3 3 4
3(High
variance)Channel reach 5 5 5 5Communications reach
4 4 4 4
Capability fit 2 5 5 2Price sensitivity 2 3 4 3
Overall attractiveness(sum of attribute scores)
27 31 30.5 29.5
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Technology Adoption Life Cycle (TALC)
Also shown as Exhibit 2-6
Technophiles
Visionaries
Laggards
Time
Sales from New Adopters/
period
PragmatistsConservativ
es
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Technology Adoption Life Cycle: Adopter Categories
Technophiles—tries out the latest and greatest technology, does not need fully developed offering
Visionaries—See competitive advantage by using technology, standardized buying with custom offering
Pragmatists—want same as visionaries but will not buy if unless technology is easily adopted with minimal difficulty
Conservatives—only buy when doesn’t cost to adopt, need to be convinced offering exact for needs
Laggards—will avoid adoption of technology at all costs
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Technology Adoption Life Cycle: Adopter Category Position and
Targeting
Technophiles—needs are curiosity, target early
Visionaries—gain competitive edge and will pay for it, target for support
Pragmatists—keep up with cutting edge, use innovation translation
Conservatives—need new technology to keep up to standards
Laggards—unique needs met by old technology
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Positioning of a Product Line
Goal is get members of the different segments to see and value both the differences and similarities
Relate to the overall corporate brand positioning, or at least considered in light of it.
A flagship product may be desired. Position consistent with McKenna’s
idea of market ownership