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8/4/2019 6 Piercy Fourth Ed
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Strategic market choices and targets:
Where to compete and where not to
Lecture 6
8/4/2019 6 Piercy Fourth Ed
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A route-map for market-led strategic change
Value-basedmarketingstrategy
Newmarketing
meets
old marketing
Strategicthinking and
thinking
strategically Customer valuestrategy andpositioning
The strategic pathway
Strategicmarket choices
and targets
Market sensingand learning
strategy
Strategicrelationshipsand networks
Change strategy
Strategicgaps
Organizationand processes
for change
Implementationprocess and
internalmarketing
Part ICustomer valueimperatives
Part IIDeveloping a value-basedmarketing strategy
Part IIIProcesses for managingstrategic transformation
The Customer
is alwaysright-handed
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The strategic pathway
Market
sensingandlearningstrategy
Strategicmarketchoicesandtargets
Customervaluestrategyandpositioning
Strategicrelationshipsandnetworks
Strategic thinking andthinking strategically
Strategictransformationand strategy
implementation
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Agenda
Market definition and the competitive box
Market segmentation and targeting
Market positioning
Market choices
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Strategic market choicesand targets
Strategic marketchoices and
targets
Market definitionand the
competitive box
Marketsegmentation
andtargeting
Marketpositioning
Marketchoices
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Market definition and thecompetitive box
Markets are not fixed or static
The way they are defined should not be either
The danger is being trapped inside the competitive boxwhile the important changes occur outside the box
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The trap of the competitivebox
Conventional value propositions
Existing customer base
New customer base
The competitive box
The usual suspects
Known competitors, operatingin traditional ways with the
existing, known customer base
and competing for market sharethrough incremental innovationNew types of
competitorNew business
models
Newcustomers New
customers
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Market definition and thecompetitive box
Re-thinking market boundaries is a high priority
The way management understands and defines itsmarkets is one of the most significant strategic issues
The product-customer matrix
a practical tool for looking at markets in new ways
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The product-customer matrix
CustomersProducts 1. 2. 3. 4. 5. 6. 7. Total
Market:
1.
2.
3.
4.
5.
6.
7.
Total
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Market definition and thecompetitive box
Mapping market structure and change
insights into drivers of change
fundamental to looking at market segmentation andtargeting
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Mapping market structureand trends for centralheating units
ProductionOf CentralHeating
Units
IndependentDistributors
ConstructionSub-
Contractors
SmallHardwareRetailers
LargeHardwareRetailers
CommercialConstructionCompanies
(85,000 units)
DomesticCustomers
(15,000 units)Direct sales = 1,000 units
Direct sales = 10,000 units
84,000 units
5,000 units
42,000 units
42,000 units
40,000units
2,000units
7,000units
75,000 units
Production =100,000 units
Consumption =100,000 units
5,000 units
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Market segmentation and targeting
Market segmentation
dividing market into groups of buyers who makecoherent targets, e.g., by demographics forconsumers to industry type for companies
aims to develop consistent marketing programmes forsegments with potentially different approaches foreach
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Consistency versusdifferentiation in marketsegmentation
Market segments
Marketingactions
A B C D
Product
Price
Communications
Distribution& service
Differentiatedmarketingactions acrossmarketsegments
Consistent value offerings foreach market segment
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Market segmentation and targeting
Insightful segmentation is based on the customer benefitfrom the product or service
e.g., customer loyalty-based segmentation
e.g., customer relationship-based segmentation
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Customer loyalty-basedsegmentation
Loyalty segments Our customers Competitors customers
Satisfied stayers
Hostages
Happy wanderers
Dealers
Committed to us and rateus highly, they show little
interest in competitors
Loyal customers, but thismay only be inertia, may
be vulnerable to competitors
Show little positivecommitment, may become
interested in alternatives
Show strong preference forthe best deal on the market,
with low supplier loyalty
Committed to competitorsand rate them highly, show
little interest in us
Repeat buyers forcompetitors, but may be
interested in us
Little commitment tocompetitors, may be
interested in our offer
No commitment tocompetitors - open to
superior offers
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Customer relationship-based segmentation
Relationshipsegments Our customers Competitors customers
Relationshipseekers
Loyal buyers
Relationship
exploiters
Arms lengthtransactionalcustomers
Invest in customer relationshipmanagement and loyalty
programmes to give a closerelationship that is long term
Find ways to offer arelationship that is superior inthe customers terms to attract
away from competitors
Focus on retention throughthe value offering and not
through relationship emphasis
Emphasize superiority invalue offering and rewards
for long-term retention superiorto those of competitors
Control expenditures onloyalty incentives and provide
economic contact, e.g. throughInternet
Offer relationship-basedincentives to switch suppliers,
but control costs to allow forshort retention
Emphasize value offering andavoid relationship investments
unless can be converted toLoyal Buyers
Demonstrate superior valueoffering and lack of ties or
barriers to switching
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Market segmentation and targeting
Broad segments and micro-segments
Strategic market segmentation
distinction between strategic and managerial issues insegmentation
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Strategic and managerialsegmentation
Strategicsegmentation
Managerialsegmentation
Corporate mission
Values
Strategic intent
Market position
Marketing plans
Resource allocation
Operationalmanagement(sales, advertising)
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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
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An extended model ofmarket segmentation
Explicitness and focus
Organizationaldecision makinglevel
Explicit/external Implicit/internal
Strategic
Operational
Strategic segmentation
Managerial segmentation
Customer benefits Qualitative approach Links to mission andvision
Organizational structure Information processing Corporate culture and
history
Conventionalsegmentation bases
Quantitative approach Conventional testsand criteria of choice
Sales and distributionorganization
Advertising andpromotion
Media buying Pricing tactics
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Market segmentation and targeting
Market segment attractiveness and internal compatibility
consider not just how attractive a segment is as atarget, but also how well it fits with companycapabilities
a significant implementation question
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Segment attractivenessand internal compatibility
Internal compatibility
Market segmentattractiveness
High Low
High
Low
Attractive segmentsthat match withcompany
capabilities
Attractive segmentsbut with poor matchwith company
capabilities
Unattractive segmentsthat do not match withcompany capabilities
Unattractive segmentsbut with match to
companycapabilities
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Market positioning
How customers compare you to the competition andwhat they decide
The logic of blue oceans and red oceans
finding spaces where there is no competition
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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
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Market positioning
But, will the big idea work? buyer utility
strategic pricing
business model
adoption hurdles
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Market choices
Usually there are choices which markets/segments totarget?
how do we set priorities?
Portfolio approaches compare
market/segment attractiveness (how well theopportunity fits our goals and capabilities
market position (how well we believe we can do inthis market/segment)
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Market attractivenessand position
Market attractiveness
Marketposition
High Low
Strong
Weak
Corebusiness
Peripheralbusiness
Illusionbusiness
Dead-endbusiness
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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 willtake 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