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Marketing Concepts & OverviewMarket Segmentation & Positioning

Dr. Ajay K. SirsiSchulich School of Business

asirsi@schulich.yorku.ca

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Introductions

• Please tell us– Your name– Organization– Role– Previous experience with Marketing theory

and practice– What are your expectations of the marketing

and sales module?

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Biography – Dr. Ajay Sirsi• Schulich School of Business, Marketing professor

• Research, writing, teaching (Exec, MBA, BBA)– Marketing: A Roadmap To Success (Pearson)– Marketing Led - Sales Driven (Trafford)– Marketing: Real People, Real Decisions (Pearson)

• Consulting– Royal Bank– Bayer– International Paper– Purolator– Manulife Financial– TELUS– Farm Credit Canada

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Seminar Objectives

• Provide you with frameworks and tools to understand marketing strategy

• Enable you to ask the right questions to design superior marketing strategies

• Enable you to implement marketing strategies – By thinking about implementation at functional

level

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Agenda

• Why do organizations succeed or fail?• What is marketing?

– Concepts and overview• Fundamentals of market segmentation

– Positioning

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Outline Key Challenges Facing Your Organization

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I’m going to show you how, using the power of Marketing, you can …

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• Build a brand– Decommoditize your business

• Attract new customers• Satisfy your customers• Retain your customers• At a lower cost• Build a more profitable business

– 8 – 80% profit improvements

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The Research Is Clear

• Organizations that succeed do so because– They develop sound marketing strategies– They execute those strategies well– They align different parts of the organization– They are always testing their business models

Source: Nohria (2003), Sirsi (2005)

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Key Requirements

• A Focus on the fundamentals– Strong strategies

• Marketing Plans• Customer value propositions

– Solid execution• Customer-focused Sales Plans• Functional Plans by Operations

Source: Nohria (2003), Sirsi (2005)

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Agenda: Day 1

• Why do organizations succeed or fail?

• What is marketing?– Concepts and overview

• Fundamentals of market segmentation– Positioning

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What is marketing?

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Source: Marketing: A Roadmap to Success by Ajay Sirsi

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What Is The Role of Marketing?

• Contextualize the market

• Be the voice of the customer within the organization

• Educate others

• Help them develop functional plans

• Achieve customer focus

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Source: Marketing: A Roadmap to Success by Ajay Sirsi

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External Analysis

Opportunities and Threats

Strengths and Weaknesses

Key Issues

Marketing Strategies and Tactics

Key Outcomes

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The Marketing Plan • External analysis

– markets– segments and customers– competitors

• Internal analysis– OTSW analysis– Key issues to be addressed next year

• Key objectives to be achieved• Key strategies • Key tactics• Key outcomes• Control of marketing plan

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Opportunities•Market is fragmented•Customers are seeking a one stop shop

Threats•Economy has slowed down•Customers are price sensitive

Strengths•We have a strong brand•We have a broad suite of offerings

Weaknesses•We have a high cost structure•We don’t have products to serve price sensitive customers•Our sales force is not trained on value selling

OTSW Analysis

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•Market is fragmented•Customers are seeking a one stop shop

•Economy has slowed down•Customers are price sensitive

•We have a strong brand•We have a broad suite of offerings

•We have a high cost structure•Our sales force is not trained on value selling

Product Development•Address customer price sensitivitySales Training•Train sales on value based sellingChannel Development•Develop lower cost to serve channels

•Address customer price sensitivity•Train sales on value based selling

OTSW Analysis Business Implications

Key Issues

Develop products for value segment

StrategiesProduct Tactics

Timing/Person

Cost/Resources

Metric to Track

Impact

Modify ABC line

Q2A. Sirsi

$55kFinanceNPD

UnitsEBIT

50 new customers$2M EBIT

Tactics

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In Chapter 4 - I show you how to develop a superior Marketing Plan

Appendix 1 has an example of a strong Marketing Plan

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Group Work

• Pick any two businesses within the same industry

• Answer these questions:– How do they segment their customers?– How do they use the marketing mix elements

(product, price, channel, marketing communications) to differentiate themselves?

– Whose strategy is superior? Why?

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Agenda: Day 1

• Why do organizations succeed or fail?

• What is marketing?– Concepts and overview

• Fundamentals of market segmentation– Positioning

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A business that is not segmenting its customers is leaving money on the table – guaranteed!

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Market Segmentation: Glue that Holds the Business Together

• Why segment customers?– If you are not segmenting your customers, you are:

• Treating everyone the same, regardless of needs• Wasting resources• Trying to be all things to all people• Not giving the sales force any direction

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Segmentation Principles

• A business exists to be profitable– Opposite: focus on volume

• All customers are not created equal– Customer needs– Cost to serve– Appreciation of value creation– Propensity to pay

• We cannot be all things to all customers– Choose segments to serve

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Good segmentations identify the groups most worth pursuing -- the

underserved, the dissatisfied, and those likely to make a first-time purchase

Yankelovich and Meer

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How To Segment

• No right way• Many ways possible simultaneously• Demographic approach easy, but not necessarily

best• Best way to segment markets

– Group customers by• Needs and value drivers• Customer attractiveness

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•Sophisticated users of data (want business expertise from AC Nielsen)•Are not buying much currently•Opportunity - they can be educated to buy more•How much time am I spending on these customers?•How do they answer customer satisfaction survey?

•Sophisticated users of data (want business expertise from AC Nielsen)•Are buying a lot, need to keep them happy•How much time am I spending on these customers?•How do they answer customer satisfaction survey?

•Unsophisticated users of data (only want market share data)•Are not buying a lot•Am I spending too much time on these customers?•How do they answer customer satisfaction survey?

•Unsophisticated users of data•Are buying a lot•They will leave unless I work with them•How much time am I spending on these customers?•How do they answer customer satisfaction survey?

< $1m > $1m

Soph

istic

ate

dU

nsop

histi

cate

d

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Gold Silver Bronze

< $100,000

$100-$500

> $500,000

Gives us all his business Buys from one other competitor

Buys frommany competitors

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•Computer•TV•Kitchen appliances

•Doorbell•Ceiling fan•Electrical panel

•Home theatre system•Security system

•Intercom•Energy monitor

Intensity of Interaction

High LowFr

eque

ncy

of U

seH

igh

Low

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Phase 1

Export

Domestic

Phase 2

Export

Home Builder

Domestic Industrial Repair & Remodeling

Phase 3

Export

Home Builder

Domestic Industrial

Repair & Remodeling

5 Years

DIY

Contractor

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Segmentation: End State

Premium Performance Value

Entertainment

Software

Manufacturing

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Segmentation: End State

Premium Performance Value

Entertainment

Software

Manufacturing

•Needs•Value Drivers

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Customer Needs And Value Drivers

Premium Performance Value

Entertainment •High impact product•Willing to pay price premiums

•User-friendly products•May consider price premium if case made

•Product consistency•Will not consider price premiums

Software •Proactive technical support•Willing to pay price premiums

•Quick turnaround•May consider price premium if case is made

•Basic quality•Will not consider price premiums

Manufacturing •High grade quality•Willing to pay price premiums

•Consistent product quality•Very willing to consider price premiums if case is made

•Diversified product line•Competitive on price

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Pivotal Matrix for Marketing – Sales Alignment

Premium Performance Value

Entertainment

Software

Manufacturing

•Value Propositions

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Pivot Matrix: Customer Value Propositions

Premium Performance Value

Entertainment •Grade A product•Dedicated TS team

•Product quality guarantee•Dedicated TS team

•Grade B product•Charge for TS

Software •Grade AA product•Inventory management

•Quick turnaround•Ability to do short runs

•Grade BB product•Sales materials

Manufacturing •Grade A product•Custom solutions team

•Cost containment•Security of supply

•Diversified product line•Competitive on price

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Segmentation Pitfalls

• Always targeting the largest segment• Failing to identify and invest in emerging segments• Developing segmentation schemes that are not

actionable– Over segmenting

• Targeting too many customers with one offering• Forgetting that segments change

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Segmentation Pitfalls

• Segmenting by product, and not by market• Using the same segmentation scheme as competitors• Always using the same segmentation approach• Relying only on the easiest -- demographics• Using complex segmentations -- before trying simple

ones• Not realizing that segmentation is evolutionary

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Segmentation Checklist

1. Is our segmentation scheme simple?– Will people understand and use it?– Is it too complex?

2. Have we segmented our markets using existing data?– Are we starting small, but starting now?

3. Have we utilized customer needs and attractiveness in our segmentation?– Or, are we relying on demographics?

4. Is our segmentation scheme actionable?– Can we actually implement this?

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Segmentation Checklist

5. Will our segmentation scheme give us a competitive advantage?– Or, is our scheme the same as our competitors’?

6. Do we have mechanisms to evolve our segmentation scheme over time?– Are we developing Marketing, Sales and Functional Plans?

7. Will our segmentation scheme enable us to be better business operators?– Will we work together as one?

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In Chapter 3 - I show you how to segment and target customers

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Your Roadmap to Success