Market Driven Strategy

W. Rofianto, ST, MSi

Development of Marketing Concept

Production

Concept

Product

Concept

Selling

Concept

Marketing

Concept

Marketing

Marketing

Marketing is the activity, set of institutions, and processes for creating,

communicating, delivering, and exchanging offerings that have

value for customers, clients, partners, and society at large.

(AMA 2007)

Market Driven Strategy

Make and Sell

Sense and Response

Marketing at Strategic Level

• Positivist (quantitative)

• Interpretivist (qualitative)

Consumer

Research

• common needs or

characteristicsSegmentation

• One or more segments to

pursueTargeting

• benefits

• unique selling propositionPositioning

Capabilities for learning about customers and markets

Market-driven strategy is a market sensing and

learning processes

Competitive strength come from superior customer

knowledge

To deliver a customer experience, less formal research,

more one-to-one communication

Consumer Village

Watch people activity

Understand what it is like to live on $50/month

Social networking sites

Market Driven Strategy

Market sensing processes Building Open-minded inquiry processes

Analyzing competitors’ actions

Listening to front-line employees

Searching for latent customer needs

Scanning the peripherary of the market

Encouraging experimentation

Market Sensing Process

Marketing information and knowledge resources1. Scanning processes

2. Specific marketing research studies

Internal and external marketing information resources

In-company resources

Open source resources

Research agency resources

Marketing Information and Knowledge Resources

A Framework for Market SensingProbability of the Event Occurring

Effect of the

Event on the

Company

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

Utopia Field ofDreams

Things toWatch

DangerFutureRisks

Market Sensing Grid

Marketing research project Defining the problem

Understanding the limitations of the research

Quality of the research

Costs

Evaluating and selecting suppliers

Research methods

Marketing Research Consideration

Research

Project and Scope

Research

Objectives

Research

Questions

Planned

Outcomes

OLD NEW

CONSUMERS Passively receiver Empowered media users

control and shape content

ASPIRATIONS To keep up with To standout from the

the crowd crowd

TV CHOICE Three networks Hundreds of channels

plus video on demand

MAGAZINES Age of the big Age of the special interest

glossies: Time, magazine for every age

Life, Newsweek and affinity group

ADS Everyone hums Talking to a group of one

BRANDS Rise of the big, Niche brands, product

ubiquitous brands extensions and mass

from Coca-Cola customization mean many

to Tide product variations

Source: Anthony Bianco, “The Vanishing Mass Market”, Business Week, July 12 2004, 58-62

Why Segmentation: From Mass Markets to Micro Markets

SegmentationRequirements

Response

differences

Identifiable

segments

Actionable

segments

Favorable

cost/benefitStability

over time

Segmentation

Levels and types of market segmentation

OperationalSegmentation

ManagerialSegmentation

StrategicSegmentation

Vision

Strategic intent

Product benefitsResource allocation

Alignment

Planning

Marketing programs

- Advertising

- Sales

- Distribution

Market Segmentation Levels

Segmentation and Market-Driven Strategy

Segments

Value

Opportunities

Capabilities/

Segment

Match

Target(s)

Positioning

Strategy

Strategic market segmentation (5)1. Identifying market segments

Segmentation variables

Characteristics of people and organizations

Consumer markets

Organizational markets

Product use situation segmentation

Buyers’ needs and preferences

Purchase behavior

2. Strategic analysis of market segments

Customer analysis

Competitor analysis

Positioning analysis

Estimating segment attractiveness

Segmentation “fit” and implementation

Segmentation Strategy

Illustrative Segmentation Variables

Characteristics

of people/

organizations

Consumer

Markets

Industrial/

Organizational Markets

Age, gender, income,

family size, lifecycle

stage, geographic

location,

lifestyle

Type of industry, size,

geographic location,

corporate culture, stage of

development, producer/

intermediary

Use situation Occasion, importance of

purchase, prior

experience with product,

user status

Application, purchasing

Procedure (new task,

modified rebuy, straight

rebuy

Buyers’ needs/

preferences

Brand loyalty status, brand

preference, benefits sought,

quality, proneness to make

a deal

Performance requirements,

brand preferences, desired

features, service

requirements

Purchase

behavior

Size of purchase,

frequency of purchase

Volume, frequency

of purchase

Market Segments Identification

Best Buy segmentation strategy Jill’s - “soccer moms”

Barry’s - wealthy professionals

Buzz’s - “tech enthusiasts”

Ray’s – “the family man”

Mr Storefront – “the small business customer”

Carrie’s – “young, single females”

Helen and Charlie’s – “older couples whose

children have left home”

Market Segment Example

Segment Dimensions for Hotel Lodging Services

Market Segmentation Example

Illustrative Example: Gasoline Buyers

Road

Warriors

True

Blues

Generation

F3 (Fuel,

Food & Fast)

Homebodies

Price

Shoppers

Higher-income, middle-aged men, drive 25-

50000 miles a year… buy premium with a

credit card … purchase sandwiches and drinks

from the convenience store… will sometimes

use carwash

16% of

buyers

Men and women with moderate to

high incomes, loyal to a brand and

sometimes a particular station …

frequently buy premium, pay in cash

16% of

buyers

Upwardly mobile men and women -

half under 25 years of age -

constantly on the go … drive a lot

snack heavily from the convenience store

27% of

buyers

Usually housewives who shuttle

children around during the day and

use whatever gas station is based on

town or on route of travel

21% of

buyers

Not loyal to brand or station and

rarely buy premium … frequently on

tight budgets.

20% of

buyers

Illustrative Consumer Perception Map

Low

Quality

High

Quality

Expensive

Inexpensive

GROUPI

GROUPV

GROUPIII

GROUPII

GROUPIV

• Brand E

• Brand D

• Brand C

• Brand B

• Brand A

Perceptual Mapping

Segmentation “Fit” for Implementation

Internal Compatibility

Market Segment

Attractiveness

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

Finer segmentation strategies

Logic

Customized offerings

Diverse customer base

Close customer relationships

Finer segmentation strategies

Micro-segmentation

Mass customization

Variety-seeking strategy

Barriers to market learning

Managers reject new insights/information

Rigid organizational structures and inflexible information

systems

Politics favour the status quo

Overwhelming pressure of existing business operations

Tendency to “active inertia”

Market Sensing Barriers

Market Targeting Strategy

The Marketing Targeting Decision Identities the People or

Organizations in a Product-Market Toward Which a Firm Directs

Its Positioning Strategy Guided by an understanding of:

• The product-market

• Its buyers

• Firm’s capabilities resources

• Competition

Effective targeting and positioning strategies are essential in

gaining and sustaining superior performance

Market Targeting Alternatives

Selective

TargetingExtensive

Targeting

Segments Clearly Defined

Differentiated But Segments

Not Clearly Defined

TargetSelectedNiche(s)

TargetMultipleSegments

ProductVariety

ProductSpecialization

Targeting Alternative

Targeting in an Emerging Market

Buyer Diversity

Segmentation limited due to similarity of buyers’ preferences

Industry Structure

Typically small new organizations

Limited access to resources

Capabilities and Resources

Unique benefit (differentiation) strategy rather than low-cost

First-mover advantage

Targeting Strategy

Single target or a few broad segments

TARGET MARKET

POSITIONING

EFFECTIVENESS

POSITIONING

STRATEGY

How well

management’s

positioning objectives

are achieved for the

market target

POSITIONING CONCEPT

The desired positioning of the

product (brand) by targeted buyers

The combination of

marketing actions

used to communicate

the positioning

concept to targeted

buyers

Strategic Positioning Initiatives

Experiential

Symbolic Functional

POSITIONINGCONCEPT

Positioning Concept

1. The positioning concept applies to a specific brand rather

than all the competing brands that compose a product

classification

2. The concept is used to guide positioning decisions over the

life of the brand

3. Multiple concepts are likely to confuse buyers and may

weaken the effectiveness of positioning actions

Positioning Issues

Positioning Errors Under-positioning – customers have only vague ideas

about the company and do not perceive anything distinctive about it

Over-positioning – Customers have too narrow an understanding of the company, product, or brand

Confused positioning – Frequent changes and contradictory messages confuse customers

Doubtful positioning – claims made for the product or brand are not regarded as credible

Positioning Errors

Product Strategy

Promotion

Strategy

Price Strategy

Distribution

Strategy

Market Target

Positioning Strategy

Targeting and Positioning

Methods for Determining Positioning

Effectiveness

Analytical

Positioning Models

Test Marketing

Customer and Competitor Research

Exercise

1. Read a brief story of a product example in an emerging market

2. Gather an additional information as needed than discuss the situation with your team mate

3. Make a perceptual map to illustrate the situation, consist of related brands positioning and consumer clusters

4. Select the appropriate target market and positioningsrategy for the product situation

5. Determine several actions should be taken on eachmarketing mix components related to the target marketand positioning strategy