3Segmentation, Targeting, Positioning SelectionTargetingAcquisition vs.Retention & ExpansionPositioningBreak market into segments that respond differently to elements of the marketing mix. Identify segment(s) that will respond most positively (i.e., profitably) to firm’s offerings. Concentrated vs. Differentiated targeting. Determine how to best acquire, retain & expand purchases by the most profitable segments. Design, price, place, & promote offering so it occupies a distinct & valued place in target customer’s mind relative to competitive offerings.
4Defining & Segmenting the Product Market Define & segment the Product Market by:type of customers served (who),particular needs of those customers (what),the means or technology used to satisfy those customer needs (how), &geography of the market served (where).NewNewChannels/ GeographiesCustomersNewCurrentProducts/Technology
5Product Market Competition: Packaged Confection Product Class All food & beverageCakes & PastriesBreads & SconesGumCandyCandied NutsDark Chocolate
6Four Levels of Product Market Definition Implies Different Tasks for each Level:Product form competition: focus marketing activities on immediate customers & competitors; e.g., Montreaux’s dark chocolates w/fruit are the best.Product category competition: convince customers that your product form/offering is best in the category; e.g., dark chocolate is much healthier than sugary candies.Generic competition: convince customers of the superiority of your product (category) offering’s ability to satisfy needs over other (category) offerings; e.g. packaged candies are the most convenient snack on the run.Budget competition: convince customers of the superiority of your company’s portfolio of products; e.g.,Apollo’s line of snacks & confections are the highest quality.Where Should the Focus Be?Be sure to identify the most relevant level of competition in each case.
7Product Market Competition: Higher Education All self improvementLaw coursesEngineering coursesMarketing coursesEntrepreneurship coursesFinance coursesCore Biz Classes
8Product Market Definition & Positioning Product form competition: focus positioning & marketing activities on immediate customers & competitors.For Cox MBA students, MKTG 6201 is a core class that, unlike other foundational classes (e.g., Accounting, Economics, OB, Finance), emphasizes the company’s boundary-spanning activities that focus on customers, downstream collaborators, and competitors.companies create and capture value from customers and downstream collaborators.will help you understand howFor Cox MBA students, Marketing is a concentration that, unlike Finance, Management, or Strategy, prepares you for a successful career in Brand Management, Marketing Consulting, and Marketing Analytics.and MarketingGood positioning statements focus on:one or two benefits that resonate with the target market.
9Product category competition: convince customers that your product form/offering is best in the category.For working professionals in North Texas seeking career advancement, the Cox PMBA is a part-time MBA program that, unlike other programs in the area, offers a small, private-school environment and a strong, professional network.Generic competition: convince customers of the superiority of your product (category) offering’s ability to satisfy needs over other (category) offerings.For ambitious people seeking continuing/higher education, SMU is a private university that, unlike other universities, will shape you into a world changer.
10(% Agree or Strongly Agree) Positioning K&PFormulating positioning strategy requires knowing:The importance of each value dimension to customersHow the brand & the competition compare on each dimensionExhibit 4 - Attribute Ratings for the 5 oz. Stand-up Pouch with Healthy Messaging ConceptHow much would you agree with the statements made about this product?Product Attribute(% Agree or Strongly Agree)Would be better for me than other chocolates87Would be high quality85Would taste great84Would come in varieties I like78Would be a good way in indulge myself74Would be good for any time of the day61Would taste better than other dark chocolates54Would be good for everyday use42Would be an all-natural snack option38Would be a good value33
11Partial Marketing-Mix Comparison Personal Computers IBM was positioned as a brand-centric differentiator with no objective or perceived advantage. PCs Lenovo; IBM customer-centric.Gateway’s positioning: customer intimacy emphasizing customization (i.e., user compatibility & configurability).Dell was positioned as a product leader with the best perceived technology.
12Positioning Formulating positioning strategy requires knowing: The importance of each value dimension to customersHow the brand & the competition compare on each dimensionImplementing the positioning strategy requires programs that communicate a brand’s differential advantage on:Attribute/benefit, price/qualityUser or Use/ApplicationProduct class or competitors
14Positioning Formulating positioning strategy requires knowing: The importance of each value dimension to customersHow the brand & the competition compare on each dimensionImplementing the positioning strategy requires programs that communicate a brand’s differential advantage on:Attribute/benefit, price/qualityUser or Use/ApplicationProduct class or competitorsTo determine a Product’s Position:Ask customers to rate a firm’s brand, the competitor’s brands, and the “ideal” brand on a number of dimensions.Plot ratings in 2 dimensions to represent the competitive “space” - typically called a perceptual map.
16Product & Brand Decisions Many Product & Brand Decisions are Related to the Product Life Cycle (PLC), Technology Diffusion, & Long-Term Expectations for Product Category EvolutionThe PLC sketches the sales history of a product category – or perhaps a product form – over time.Strategy and segmentation options and the importance of marketing mix variables vary across each stage of the PLC.Not all product categories follow the standard PLC curve across time in a linear manner.
18Cumulative Five-Year Purchase Volume for Various Mobile Technologies Source: Morgan Stanley%s represent five-year predicted penetration rate for tablets & 2011 penetration rates for other technologies
22Marketing Strategies Over the Product Life Cycle PLC StagesMarket size small and growth rate is increasing.Product: disruptive technology that creates new product category.Pricing: skimming targets innovators/visionaries & LT Product (quality-based) differentiationAdvertising: product category advantages.Distribution & Selling : PUSHIntroductionGrowthMaturityDecline
23Marketing Strategies Over the Product Life Cycle PLC StagesMoving MainstreamIncreasing competitionMarket segmentationPositioning for LT advantageContinue to emphasize Product differentiation (innovation & quality) & market growth or niche of maturing marketBegin shift to brand differentiation/ customer intimacy with incremental product improvements, proliferation as market matures (i.e., late growth)IntroductionGrowthMaturityDecline
24Product & Brand Strategies… In the Growth Stage or in Hi-Tec, Turbulent Categories with Rapid Cycles & Permanent Growth:Product Line Strategies focus on Product Innovation that replaces (i.e., cannibalizes) current offeringsBranding strategies deemphasize specific products/features and focus on organizational competencies & differentiation (i.e., multiproduct or corporate branding)Consistent with Innovation or Product Differentiation
25Intel’s Co-branding Efforts After the “Intel Inside” branding campaign began 1991, the company received over $3 billion worth of advertising exposure showing the Intel Inside logo. The logo appears in POP displays too.
26Marketing Strategies Over the Product Life Cycle Fully MainstreamOligopoly market structureWell-defined segments with sophisticated consumersPositioning for advantageEmphasize brand differentiation/ customer intimacy, incremental product improvements, proliferation, intangibles (e.g., branding, service, advertising) orEmphasize operational efficiencies to establish Cost Leadership advantage in fully mature market.Innovator attempts to jumpstart new cycle of Growth (Apple).PLC StagesIntroductionGrowthMaturityDecline
27Product & Brand Decisions… In the Maturity/Decline Stage:Product Line Strategies focus on Product Proliferation that extends current offerings to:Eliminate competitors &/or erect entry barriersProvide one-stop shop for downstream collaboratorsSatisfy increasingly segmented customer baseBranding strategies emphasize distinct product brands and features (i.e., multibranding), sometimes applied to entire lines.Consistent with Brand-centric differentiation or Customer Intimacy
28P&G’s Product Proliferation & Multibranding Strategy P&G Controls Over 60% Market Share in the Laundry Care CategoryKey Management Challenge: How to organize, manage & market all the brands?
31Marketing Strategies Over the Product Life Cycle PLC StagesMany strategies for reviving mature product categories can be applied to those in decline; for example, product enhancements and line extensions for segments still buying category.Sometimes product categories revive due to serendipity.Being the “last iceman” in a truly dying market can be profitable… to a point.IntroductionGrowthMaturityDecline
32Modifying the Offering Mix How consistent is the new offering with existing offeringsComplementarities versus cannibalizationDoes the organization have the resources & capabilities to introduce & sustain the offering?Is there a viable market for the offering? What share is required?What position do we currently own and do we want to own?What type of branding strategy do we implement?Multiproduct (family) or multibranding (individual)
33Montreaux Chocolate USA This case addresses a global CPG company’s attempt to develop optimal positioning for a new dark chocolate offering. Be sure to use the Montreaux spreadsheet to calculate trial rates, market share, and project contribution; review the Sales Projections assignment if you’re not sure how to conduct the analyses. And use the Montreaux Exhibits to identify Apollo’s (potential) competitive advantage and a positioning statement for Montreaux chocolates.
34Paragraph #1 Paragraph #2 Paragraph #3 Topic Poor Fair Good Excellent Launch StrategyBrand Name & Branding Strategy (see K&P pp ) & First-year Brand Objective(s).25.5.751Product-Market Strategy (see K&P Ex. 1.2) &Targeting & Positioning StatementImplementation and FitRecommended A&P budget and Quality Level to achieve intermediate objectives (Awareness, Distribution, Repeat)Likelihood of achieving intermediate objectives given Company’s Resources & CapabilitiesLikelihood of achieving intermediate objectives given external Opportunities & Threats (Customers, Competition, Collaborators, PLC)Financial EvaluationYear-1 Financial Analysis (key assumptions required to meet objective)Financial Assessment of the Likelihood of meeting Year-2-3 objectivesValue-Adding Exhibits (e.g., SWOT, Comparative Analysis, Positioning Map)Overall Presentation & OrganizationParagraph #1Paragraph #2Paragraph #3
35Customer-Based Brand Equity Model Consumer-BrandResonance4. RELATIONSHIPS =What about you & me?DEEP RELEVANCEINTENSE, ACTIVE LOYALTYBehavior/Affective CommitmentRATIONAL & EMOTIONAL REACTIONS3. RESPONSE =What about you?Consumer JudgmentsValue, relevance, differentiationConsumer FeelingsExcitement, security, funPOINTS-OF-PARITY & POINTS-OF-DIFFERENCE2. MEANING =What are you?BrandPerformanceCharacteristics, design, priceBrandImageryWho uses, when, personality1. IDENTITY =Who are you?DEEP, BROAD BRAND AWARENESSBrand SalienceRecognition & RecallPurchase/Consumption Consideration
36Financial Analysis in Marketing K&P Chapter 2 Marketing Pro FormasBreakeven AnalysisCustomer Lifetime Value (CLV)Sales ForecastsEconomic Value AnalysisChannel Margin CalculusDemand Elasticity
37Market Potential, Sales Potential, Sales Forecast Estimating Market Potential:Determine the potential buyers /users of the products.Determine # of customers in each group of buyers.Estimate the potential purchasing/usage rate.Estimating Company Sales PotentialMultiply market potential by desired or “best” possible market share.Sales Forecast: Estimate from Sales Potential…Use purchase intention surveys/qualitative methods.Forecasts for frequently-purchased items combine test market or early sales data with brand awareness, trial, repeat purchase, or usage rate data(See Sales Forecast Final Exam Question)
38Estimating Year-1 Sales Volume Using a Chain Ratio Model Focus Group %Adjustedfor BiasAwareness%DistributionPenetrationTrial RateDefinitely %80%Depends onProbably %30%ConsumerTrade CRM/××××=×% Trial Rate# HouseholdsTrial Households=Trial HouseholdsRepeat Rate %Repeat HouseholdsExcellent product (~38%)From AboveAverage product (~33%)Mediocre product (~28%)x Repeat Rate×=Trial HouseholdsRepeat HouseholdsRepeat Purchase RateTotal Units Sold+×=
39Next Week Montreaux Chocolates Review QuestionsWhat are 4 levels of product market definition?What are the key customer segments, growth strategies, and strategic emphases for each stage of the product life cycle?What are the key questions to ask when making offering modification decisions?What is the difference between market potential, sales potential, & sales forecast?Next Week Montreaux Chocolates