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Strategic market choices and targets: Where to compete and where not to Lecture 6 1.

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Presentation on theme: "Strategic market choices and targets: Where to compete and where not to Lecture 6 1."— Presentation transcript:

1 Strategic market choices and targets: Where to compete and where not to
Lecture 6 1

2 A route-map for market-led strategic change
Part I Customer value imperatives Part II Developing a value-based marketing strategy Part III Processes for managing strategic transformation The strategic pathway Change strategy Market sensing and learning strategy The Customer is always right-handed Strategic gaps Strategic market choices and targets Strategic thinking and thinking strategically New marketing meets old marketing Organization and processes for change Customer value strategy and positioning Implementation process and internal marketing Value-based marketing strategy Strategic relationships and networks

3 The strategic pathway Strategic thinking and thinking strategically
Market sensing and learning strategy Strategic market choices targets Customer value positioning relationships networks Strategic thinking and thinking strategically transformation and strategy implementation

4 Agenda Market definition and the competitive box
Market segmentation and targeting Market positioning Market choices

5 Strategic market choices and targets
Market definition and the competitive box Market segmentation and targeting Strategic market choices and targets Market positioning Market choices

6 Market definition and the competitive box
Markets are not fixed or static The way they are defined should not be either The danger is being trapped inside the competitive box while the important changes occur outside the box

7 The trap of the competitive box
The usual suspects Known competitors, operating in traditional ways with the existing, known customer base and competing for market share through incremental innovation New types of competitor New business models Conventional value propositions New customers New customers Existing customer base New customer base

8 Market definition and the competitive box
Re-thinking market boundaries is a high priority The way management understands and defines its markets is one of the most significant strategic issues The product-customer matrix a practical tool for looking at markets in new ways

9 The product-customer matrix
Market: Products 1. 2. 3. 4. 5. 6. 7. Total Customers 1. 2. 3. 4. 5. 6. 7. Total

10 Market definition and the competitive box
Mapping market structure and change insights into drivers of change fundamental to looking at market segmentation and targeting

11 Mapping market structure and trends for central heating units
Production = Consumption = 100,000 units 100,000 units Direct sales = 10,000 units Commercial Construction 84,000 units 42,000 units Construction 75,000 units Companies Independent Sub - (85,000 units) Distributors Contractors 42,000 units 7,000 units Production 40,000 Of Central Small units Heating Hardware Units Retailers 2,000 units 5,000 units Large 5,000 units Hardware Retailers Domestic Customers (15,000 units) Direct sales = 1,000 units

12 Market segmentation and targeting
dividing market into groups of buyers who make coherent targets, e.g., by demographics for consumers to industry type for companies aims to develop consistent marketing programmes for segments with potentially different approaches for each

13 Consistency versus differentiation in market segmentation
Market segments A B C D Product Price Communications Distribution & service Differentiated marketing actions across market segments Marketing actions Consistent value offerings for each market segment

14 Market segmentation and targeting
Insightful segmentation is based on the customer benefit from the product or service e.g., customer loyalty-based segmentation e.g., customer relationship-based segmentation

15 Customer loyalty-based segmentation
Loyalty segments Our customers Competitors’ customers Committed to us and rate us highly, they show little interest in competitors Committed to competitors and rate them highly, show little interest in us Satisfied stayers Loyal customers, but this may only be inertia, may be vulnerable to competitors Repeat buyers for competitors, but may be interested in us Hostages Show little positive commitment, may become interested in alternatives Little commitment to competitors, may be interested in our offer Happy wanderers Show strong preference for the best “deal” on the market, with low supplier loyalty No commitment to competitors - open to superior offers Dealers

16 Customer relationship-based segmentation
segments Our customers Competitors’ customers Invest in customer relationship management and loyalty programmes to give a close relationship that is long term Find ways to offer a relationship that is superior in the customer’s terms to attract away from competitors Relationship seekers Emphasize superiority in value offering and rewards for long-term retention superior to those of competitors Focus on retention through the value offering and not through relationship emphasis Loyal buyers Control expenditures on loyalty incentives and provide economic contact, e.g. through Internet Offer relationship-based incentives to switch suppliers, but control costs to allow for short retention Relationship exploiters Emphasize value offering and avoid relationship investments unless can be converted to Loyal Buyers Arm’s length transactional customers Demonstrate superior value offering and lack of ties or barriers to switching

17 Market segmentation and targeting
Broad segments and micro-segments Strategic market segmentation distinction between strategic and managerial issues in segmentation

18 Strategic and managerial segmentation
Corporate mission Values Strategic intent Strategic segmentation Market position Resource allocation Marketing plans Managerial segmentation Operational management (sales, advertising)

19 Market segmentation and targeting
Conventional views of market segmentation methodology to identify criteria for evaluation segmentation approach (differentiated, concentrated, undifferentiated) An extended model of market segmentation a diagnostic framework to distinguish between strategic and operational issues and address implementation questions

20 An extended model of market segmentation
Explicitness and focus Explicit/external Implicit/internal Strategic segmentation Strategic Customer benefits Qualitative approach Links to mission and vision Organizational structure Information processing Corporate culture and history Organizational decision making level Managerial segmentation Sales and distribution organization Advertising and promotion Media buying Pricing tactics Conventional segmentation bases Quantitative approach Conventional tests and criteria of choice Operational

21 Market segmentation and targeting
Market segment attractiveness and internal compatibility consider not just how attractive a segment is as a target, but also how well it fits with company capabilities a significant implementation question

22 Segment attractiveness and internal compatibility
High Low High Attractive segments Attractive segments that match with but with poor match company with company capabilities capabilities Market segment attractiveness Unattractive segments that do not match with company capabilities but with match to company capabilities Low

23 Market positioning How customers compare you to the competition and what they decide The logic of blue oceans and red oceans finding spaces where there is no competition

24 Market positioning Creating new market space
looking across substitute industries looking across strategic groups within the industry redefining the buyer group look across to complementary products/services re-think the functional/emotional orientation of the industry participate in shaping external trends

25 Market positioning But, will the big idea work? buyer utility
strategic pricing business model adoption hurdles

26 Market choices Usually there are choices – which markets/segments to target? how do we set priorities? Portfolio approaches compare market/segment attractiveness (how well the opportunity fits our goals and capabilities market position (how well we believe we can do in this market/segment)

27 Market attractiveness and position
High Low Core business Peripheral business Strong Market position Illusion business Dead-end business Weak

28 Market choices Portfolio approach identifies
core business – targets with a good fit and where we can do well peripheral business – market is less attractive to us but we will take a strong position illusion business – attractive markets where we can take only a weak position dead-end business – unattractive markets where we do badly. Provides a basis for making investment choices

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