3 Shell’s Customer Segmentation study Methodology * Statistically identified 10 distinct “Clusters” of customers with different needs/ attitudesSurveyed 5000 respondents in 6 markets.Questions included* Behavior patterns* Desired Features* Frustrations* Brand Ratings* Psychographics* DemographicsStudied Survey results from each clusterDeveloped name and personality for each clusterSource: Wharton School
5 Segments selected Premium speedsters Personality : Internally driven, CompetitiveMentalityGas Purchasing : Fast pumps, quick accessIn a word: Power mindedSimplicity SeekersPersonality: Overburdened, Frustrated, Loyal to others, caring, sensitive. Hard to motivate.Gas Purchasing:Reactive. Want things that make buying gas easy. Major brand= product reassurance.In a Word…”Overwhelmed”Safety FirstersPersonality: Confident, Self-assured, ResponsibleControl oriented, well prepared.Gas purchasing: want cleanliness, comfort, Efficiency, safetyIn a word….”Safety Minded”Source: Wharton School
8 Single Segment Concentration Zodiac concentrating on executive and professionalsSelective Specialization – may be or may not beSynergy among the segments selectedHLL in SoapsProduct specialization - Specialized product toseveral segments – TVS makes scooters of allranges to several socio-economic classesMarket TargetingMarket specialization – Serving many needs ofa single customer group. Financial services toNRIsFull Market Coverage - General Motors,
10 To some it means the segmentation decision (economy and premium segments). To others it is an image question (Casual, sporty wear – Benetton)To still others it means selecting which product features to emphasize – (flavoror foaminess of toothpastes)Positioning a brand is obtaining mind-space of the consumer for the brand withRespect to competitionPositioning is the act of designing the company’s offering and image to occupya distinctive place in the mind of the target market so as to maximize thePotential benefit to the firm. The result of positioning is the successful creationOf a customer focused value propositione.g. – Colgate Total – Multi-benefit toothpaste as a one product solution forpeople with tooth problemsAs against Colgate Dental Cream – Core Identity for strong, white teeth meaninga toothpaste to maintain healthy teeth.
12 Embrace the obvious position possible in the market or granted by the market. Positioning should be in line with the perception of consumers’mind not against itCoke: ‘The Real Thing’ is fine; it is the original colaCoke: Always Coca-Cola may not be fine as half the market is PepsiMany positioning ideas are founded on how company estimates the futureSamsung – Challenging Limits – Looks alrightAvis: We are No.2. We try harderBe Simple: Volvo – Drive SafelyPositioning is long term. Do not be driven by the stock market
15 Determine Target Market Laptop for the business professionalDetermine category membership of the brand under considerationHewlett Packard dv1000 is a sophisticated business laptopIdentify the competitionSony, Toshiba
16 4. Establish the Category Points of Parity to fulfill the necessary conditions of category membershipthere are three main ways to convey a brand’s category membership- announcing category benefitscentrino mobile technology- comparing to exemplars on par with HP’s excellence in instrumentation- relying on the product descriptorHP Pavillion dv1000 is an entry level businesslaptop
17 5. Establish the Competitive Points of Parity to establish the equivalence of Product benefits, attributes, values with respect to competitionHP’s manufacturing quality is no way behind Sony or Toshiba. It isbacked by decades of manufacturing electronic systems
18 6. Establish the Points of Difference if any to take a differentiated position If no POD exists then the brand takes a head on position or a me-toopositionHP has an excellent service network in India as compared to Toshiba.HP is not as expensive as Sony7. Write out the Positioning StatementTo the young urban professional (target market) our product – HPPavilion dv 1000 is a rugged system with all the necessary features of a state-Of-art business computer and is offered as a value for money laptop withExcellent service backup.
19 Important considerations in choosing Points of Difference (PODs) (1) PODs are desirable by the customer- Relevant and important to the customer – e.g. price of HPLaptop- Distinctiveness – Service backup is not a common featureof all foreign made laptops in India- Believable – HP has been in the electronic business fordecades
20 (2) PODs are deliverable to the customer - Feasibility – HP has the required organization to make theservice deliverable and the required technologyto offer a value for money product- Communicability- HPs products are not known as very expensive- Sustainable- HP has the required R&D to continue makingstate-of –art upgradesIn this case PODs are anchored at the benefit level, sometimes they could beAnchored at the attribute or value level
21 Handling Conflicting POPs and PODs Sometimes attributes and benefits are negatively correlated or move in the oppositeDirection. Ideally consumers want to maximize their benefit package.Examples of such cases are(1) Low Price vs High Quality(2) Taste vs Low Calories(3) Nutritious vs Good Tasting.
22 Methods to overcome such situations - Go for straddle positioning – do both simultaneously. BMW designedits car for both luxury and performance- Present the communication messages for each attribute / benefitSeparately- Leverage equity of another entity e.g. Intel Inside- Redefine the relationship – Teach customers that the relation betweenattributes is redefined and now stands positive e.g. Apple is user friendlyand not regarded as powerful. Apple came up with an ad campaign thathad the tag – ‘Power to be your best’, teaching customers that they used itbecause it was user friendly and having used it successfully it was powerful.
23 DifferentiationIt is the process of adding a set of meaningful and valued differences toDistinguish a company’s offering from competitor offeringsA difference will be stronger if it satisfies one or more of the following criteria1. Important - Infrastructure investment of business school2. Distinctive , but not necessarily superior - Bajaj scooter3. Superior - Product superiority of Gillette4. Preemptive - cannot be easily copied - Zilog Processor5. Affordable - Personal Computer of Acer6. Profitable - MTR’s food products
24 Dimensions on which differentiation can be achieved by firms 1. Product / Services2. Personnel3. Channel4. Image
25 Product / Services- Product / Service Qualityperformance based – BMWconformance quality – CMM in softwarephysical signs and cues – Tata Indica- Form - Satchets- Features – Cameras- Durability – Volvo- Reliability – Maytag- Repairability – Maruti- Style – Benetton- Design – Designer wearServices- Ordering ease – home delivery pizzas- Installation – Mobile- Customer Training – GE Medical Systems- Customer Consulting - Saree selling- Maintenance and repair – Premium apartments in the city.
26 Personnel- Trained personnel should exhibit the following- Competence – Repair engineers of process plants- Courtesy - Front line staff in premium hotels- Credibility – Premium hospital doctors- Reliability – Parallel computers- Responsiveness and Communication – Beauty Consultants
28 Products, New ProductDevelopment Process, Branding
29 Illustrative Product decisions Corporate product portfolio including mergers and acquisition decisions andchanging portfolioSBU product portfolio including design of new product development process andproduct deletion decisionProduct line positioning, width and depth of product line, product modificationd. Brand positioningFactors affecting product decisions- the consumer- the competitors- the environmental factors- firm’s own objectives and resources
31 ProductA product is anything (bundle of benefits) that can be offered to a marketto satisfy a want or need. An offering consists of the product features /Quality, service mix/quality, value based price. Products include - physicalgoods (automobiles), services (musical concert), persons (electoral candidate),Experiences (air journey), events (cricket match), tourist places (Kashmir),Properties (Leela Penta Hotel), organizations(hospitals), information(tradeShows) and ideas(family planning)
32 Analysing the Five Product Levels – Indica Automobile CUSTOMER VALUE HIERARCHYAnalysing the Five Product Levels – Indica AutomobileCore benefit - TransportBasic Product - 4 wheel closed carExpected product - good performance - all specsin the ad in small lettersAugmented product - wants beyondexpectations - best after sales service eventhough not requiredPotential product - possible evolutionfor the car of tomorrow
33 Classification of products durability, tangibility basisdurables, nondurables/consumables, servicesuse basisconsumer, industrial, military, government
34 Industrial goods raw materials and parts natural and manufactured raw material, components, subassemblies/modules, semi-knocked down kitscapital itemsInstallations - buildings and plantEquipment - portable factory equipment and office equipmentturnkey projectssupplies / consumables and business servicesoperating supplies (paper, lubricants); maintenance/repair items (paint) and maintenance / repair service(Copier repair), business advisory services (legal, managementconsulting, advertising)
35 Consumer Goods Classification Convenience goods - staples (soaps), impulse (gum)emergency (umbrellas)Shopping goods - homogenous (fans, food mixers -price significant), heterogenous (textiles, furniture- non price issues also signficant)Specialty goods - goods with unique characteristics orbrand identification - cars, camerasUnsought goods - Special selling effort reqd- encyclopedias, life insurance .
37 P&G Product-Mix vs Product line PRODUCT SYSTEM – PC +PRINTER+ OPERATING SYSTEM + APPLICATION S/W + MOUSEP&G Product-Mix vs Product lineCrest comes in twoformulations andthree sizes andso has a depth of sixProduct Linelength for Bar soapsDeodorantsDetergentsProduct mixwidth - partialBarSoapIvoryCamayLavaKirk’sZestSafeguardCoastOil of OlayProduct Linelength for ToothpasteToothpasteCoffeeGleemCrestP& G’s product lines are consistent(closely relatedto each other) in distribution
38 Major elements of managing products Product Life CycleProduct Portfolio AnalysisObjectives of Product Portfolio AnalysisProduct Line Management
40 Making the PLC Operational / Issues to Look at PLC Unit of Analysis – Product Class, Product Form, Product Line…..What is the relevant market to which the PLC appliesRelevant Product Market + Relevant Geographic Market3. What is likely lifecycle pattern to emerge- fad, fashion, style, cycle-recycle, stapleIdentifying the product’s stage in the PLC ModelUnit of measurement of PLC – unit sales, rupee valueDevelop PLC on weekly, monthly, quarterly or annual data
41 Empirical Generalization: Always (Almost) Looks Like a Bass Curve
42 Color TV Forecast 1966 Industry Built Capacity For Peak in 14 million unitsPeak in1968
51 Objectives of Product Portfolio Analysis Resource allocation among products and marketsportfolio analysis of competitors leads to a refinedunderstanding of competitive strategy by action –reaction stepsAssess the marketing effort for each product to direct itin the product portfolio from one place to another
53 Shell International directional policy matrix Prospects for sectors profitabilityUnattractiveAverageAttractiveCompany’sCompetitiveCapabilitiesWeakDisinvestPhased withdrawal custodialDouble or quitPhased withdrawalCustodialGrowthTry harderStrongCash generationGrowth leaderleaderCompetitive capabilities- Market position- Production Capability- Product R &D
54 Mc Kinsey/GE Business Array Industry attractiveness – Size, Market Growth, Pricing, Mkt. DiversityCompetitive Structure, Industry ProfitabilityBusiness strength- Size- Growth- Share- Position- Profitability- Margins- Tech.Position- Image- PeopleHighMediumLowInvestment and growth(G)Selectivity/EarningsHarvest
55 Product performance matrix Company salesDeclineStableGrowthIndustry salesProfitabilityMKT shareBelow targetTargetAbove TargetAbovetargetDominantaverageMarginalmarginal
56 Product Line analysisProduct Line ManagementProduct line length management
57 Study sales and profits of each item in line, to see Which to build, maintain, harvest, divest. Do ABCAnalysis on sales / profitsCore products – Basic Computers – low marginsStaples – CPUs, Memory chips – higher marginsSpecialties – digital movie equipment – still highermarginConvenience items – monitors, printers –high volumehigh marginManage each of the above four types of products differentlyProduct Line AnalysisMarket Profile: Examine how the line is positioned againstCompeting lines. Understanding corresponding competingProducts between your line and competitor’s line. UnderstandGaps in product line and understand market segements
58 Product Line Length Management Product line objectives would be to induce both up selling and cross sellingHigh Market share seeking firms will have longer product lines. Highprofitability seeking firms will have shorter lines of important /more profit product items.
59 Product line length Management Line stretchingUpward – Maruti – 800, Omni, Esteem, Baleno, Toyota - LexusDownward – Surf – WheelTwo way - Rural Transport Vehicle – Ambassador – Mitsubishi Lancer(Hindustan Motors)Texas Instruments in Hand CalculatorLine Filling (each item should produce a just noticeable difference)TVS TVS Scooty --- TVS SUZUKI MobikeLine Featuring: (oft promoted brand in line)Lux in Soaps for HLLLine modernization – Intel in MicroprocessorsLine Pruning – First Ruf & Tuf ready to stitch kits. Later Ruf & Tuf Jeans
60 Developing New Products Firm endNew Product Development ProcessConsumer endConsumer Adoption Process
61 New Product Development Process Make or Buy DecisionIssues to New Product DevelopmentSteps to New Product development ProcessFactors for success of new product launchesNew Product Strategies - Reactive and ProactiveSome reasons for new product failures
62 Make or Buy DecisionConsiderations1. Timing Considerations2. Superiority of ‘Buy’ technology3. Cost considerations4. Management, Legal and Market feasibility