Strategic Positioning and Segmentation

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Strategic Positioning and Segmentation

• Gary Akehurst

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Strategic Positioning and Segmentation

• Marketing and sales strategy development is of
  necessity iterative, giving strategic thrust
• 1 the bases upon which the organisation intends
  to establish its competitive advantage
• 2 the scope, or boundaries of the area in which
  it is intended to compete (its competitive arena)
• 3 the corporate positioning it intends to achieve
• 4 the market segments it will serve
• 5 the positioning it aims for in each competitive
  arena it enters

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Strategic Positioning and Segmentation
Strategic Thrust
competitive advantage cost differentiation
corporate positioning
product-market scope segmentation
Product/market positioning
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Strategic Positioning and Segmentation

• a company can seek to establish its distinction
  in a market by emphasising lower cost or seeking
  other bases upon which to differentiate itself
• this decision influences the nature of the
  offering to the market and is fundamental in
  determining its relative attractiveness
• this decision on how to develop its competitive
  advantage deliberately constrains the company in
  its strategic options
• this decision concentrates resources, efforts and
  strategic thinking in particular ways

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Strategic Positioning and Segmentation

• building and sustaining competitive advantage
  means that some competencies will be developed
  and some assets will be enhanced at the expense
  of others
• strategic thinking will be channelled to develop
  strategies in a given direction in the search for
  advantage
• channelling of strategic thinking gives a strong
  link with other decisions
• choice of competitive advantage shapes potential
  positioning strategies (determining that some
  positions may be possible and others are not)

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Strategic Positioning and Segmentation

• cost-based sources of competitive advantage may
  relate to production or marketing efficiency,
  improved manufacturing systems, capacity
  utilisation, strengthening buying power or
  reducing materials and overhead costs
• differentiation-based sources of CA may relate to
  product attributes or performance, the quality of
  materials and processing, product availability or
  to special skills, experience and knowledge

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Strategic Positioning and Segmentation

• Competitive arena
• choice of where to compete can be as important as
  how to compete
• defining the competitive arena could be in terms
  of products and markets - this has been called
  product-market scope (Wensley calls this
  product-market space)
• a product-market is a group of potential
  customers with similar needs and sellers who
  employ similar methods of technologies and
  marketing programmes to satisfy those needs
• a product-market space is the commercial arena in
  which sellers compete with each other for
  customers
• Ansoff considers alternative growth paths as
  either existing products and markets or new
  products and markets

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Strategic Positioning and Segmentation

• Competitive positioning
• concerned with how customers perceive
  alternative offerings on the market compared to
  each other
• Corporate positioning
• concerned with how the organisation is, and
  wishes to be regarded by, consumers relative to
  the competition to be effective this positioning
  is built upon and should be consistent with the
  choices made about the basis of competitive
  advantage

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Strategic Positioning and Segmentation

• positioning may start with a product, a service,
  a company, a person
• but it is not what you do to a product
• it is what you do to the mind of the prospect
• you position the product in the mind of the
  prospect
• source Ries, A. and J. Trout, 1982, Positioning
  The Battle for Your Mind, New York McGraw-Hill

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Strategic Positioning and Segmentation

• Bases of Corporate Positioning
• the organisation could strive for leadership in
  terms of
• market share
• quality
• service
• technology
• innovation
• variety
• integrity
• community service

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Strategic Positioning and Segmentation

• Bases of Product Positioning
• the products position could be based upon
• cost, economy, value
• product features
• product range
• product quality
• services, customer care, problems solved
• use and application type

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Strategic Positioning and Segmentation

• Segmentation
• differences between customers in terms of their
  characteristics, behaviour and needs
• while positioning and segmentation are different
  concepts, ultimately they are linked by customer
  needs (focusing on the customer benefits that
  matter most to different customer types while
  the strongest competitive position to take is
  that where customers recognise that a supplier or
  product is the one to choose because it best
  meets their needs)
• target markets will be identified from the
  choices made about product-market scope and from
  the analysis of potential market segments
• in these target markets product-market positions
  are established

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Strategic Positioning and Segmentation
Competitive positioning and market segmentation
How customers perceive the alternatives
How planners identify groups of customers
Competitive market positioning segmentation
Customer needs
Market
Market offerings
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Strategic Positioning and Segmentation
Strategic marketing and sales plans require
decisions on what, who, how, where and
when WHAT WHO positioning segmentat
ion HOW, WHERE AND WHEN need to specify
target markets, communication and the marketing
mix (4Ps)
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Strategic Positioning and Segmentation

• segmentation and positioning strategies are thus
  at the heart of marketing and sales strategy
  development
• they provide much of the strategic thrust in
  directing
• what is to be achieved (a given market
  positioning concerning customer perceptions and
  preferences)
• amongst what target customer groups
• both start as issues of perception
• the centrality of both these strategies is
  demonstrated by the strong links they have to
  other major elements in marketing and sales
  strategy formulation

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Strategic Positioning and Segmentation
Stages in segmentation and positioning
Market segmentation
Identifying the most productive bases for
dividing a market, identifying customers in
different segments and developing segment
descriptions evaluating attractiveness of
different market segments, niches or segment
groups, choosing which should be targets identi
fying the positioning of competitors in the
market, target segments or niches, to develop a
positioning strategy doing this should inform
segmentation, revising targets and positioning
approaches
Choice of target markets
Competitive positioning
Source Hooley, Saunders Piercy, 1998, p202
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Strategic Positioning and Segmentation

• positioning involves designing the companys
  offering and image so that they occupy a
  meaningful and distinct competitive position in
  the target customers minds (Kotler)
• it is an attempt to influence that image or
  perception so it is cumulative, relative and
  imaginary
• it may be ill-defined but how can this be planned
  and controlled?
• levels of precision depends upon choices made
  about the variables or dimensions
• Unique or fuzzy, confused, mutually inclusive?
• How easily measured?
• Direct or surrogate measures?
• Operational?
• Can plans be made to reach target customers?

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Strategic Positioning and Segmentation

• in considering positioning there needs to be an
  assessment of the factors which distinguish the
  advantages and disadvantages of competitive
  market offerings
• there is a strong connection to brand strategy
• without branding there would need to be a very
  high volume of marketing communications to get
  consumers to distinguish between products
• positioning and segmentation are linked, either
  of the following may apply
• given target market segment, which product
  positioning?
• given target product positioning, which market
  segment?

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Strategic Positioning and Segmentation

• Not all competitive differences will create a
  strong competitive position and attempts to
  create differentiation should meet the criteria
  of
• importance (creates a highly valued benefit for
  significant numbers of customers)
• distinctive and pre-emptive (difference cannot be
  imitated or performed better by others)
• superior (a superior way to obtain the benefit)
• communicable (the difference should be capable of
  being communicated to customers and understood by
  them)
• affordable (target customers can afford to pay
  for the difference)
• profitable (the difference will command a price
  adequate to make it profitable)

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Strategic Positioning and Segmentation

• Positioning Strategy - the marketing mix must be
  synchronised to deliver the desired positioning
• products need to be convincing (high quality
  positioning with inferior products? Consider both
  the physical and perceptual properties of
  products the situation conditions consumer
  perceptions - e.g. tomato sauce in a restaurant
  serving haute cuisine?)
• services need to re-inforce the position same
  day service must be that claims of fast
  delivery, no waiting or friendly/competent/timely
  service engineers must be realistic
• pricing should be appropriate to the position

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Strategic Positioning and Segmentation

• distribution - product availability - wide
  availability for a mass market product and
  selective availability for distinctive status
  quality location, quality of staff, training and
  clientele must be consistent with the position
• communication - expression adds depth to images -
  product positions identifying types of people or
  lifestyles would be difficult without
  communication (advertising)
• products with unique applications need
  demonstration
• products with superior features need them to be
  known

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Strategic Positioning and Segmentation

• Successful Positioning Strategy
• positioning must be on dimensions which are
  relevant and important to the consumer (would a
  restaurant which advertised free doggie bags
  attract you? How important is the colour of roof
  insulating material?)
• the promoted image must be believable (if
  reference influence is employed in advertising
  then it must be relevant and credible)
• the strategy must be consistent and nurtured over
  time (promises must be delivered and buttressed
  by subsequent word of mouth trade customers may
  react badly to inconsistent suppliers)
• positioning must be reinforced by all aspects of
  the marketing mix
• the whole exercise should be worthwhile

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Strategic Positioning and Segmentation

• Positioning Errors
• under-positioning (customers have only vague
  ideas about a company or its products, do not
  perceive anything special about it)
• over-positioning (customers have too narrow an
  understanding of the company, product or brand)
• confused positioning (frequent changes and
  contradictory messages confusing customers)
• doubtful positioning (claims made for the
  company, product or brand may not be accepted
  whether true or not)

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Strategic Positioning and Segmentation

• Positioning Problems
• corporate and product positioning
• consistent product and corporate positioning?
• corporate umbrella with variable product
  positions?
• mixed - some under umbrella with some outliers
• sometimes good reasons for diversity (e.g
  high/low quality)
• history and inertia may explain some of the
  differences (e.g. acquisitions with unique
  history and high profile brands - it may be
  imprudent to impose corporate uniformity because
  this could diffuse the intensity of the brand
  positioning)

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Strategic Positioning and Segmentation

• Positioning Problems continued
• positioning intensity and the need to retain some
  flexibility (intense brand positions can impose
  constraints upon future strategies)
• temptation to over-exploit an intensely
  positioned brand with line extensions and new
  products which do not fit the original
  positioning, and which could damage the original
  product
• multi-national positioning - some brands can
  achieve similar positions in many countries
  simultaneously but in many situations it would
  not be possible or appropriate

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Strategic Positioning and Segmentation
Alternative Perspectives of the Total Market
Describe and Divide
perfectly homogeneous completely
heterogeneous Market market segments markets
D1 D2 D3 D4 D5 D6
D1 D2
D1
D2
Aggregates to
D3
Disaggregates to
D3
D4
D4
D5
D6
D5 D6
Economists marketing viewpoint of
buyer perspective managers view behaviour
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Strategic Positioning and Segmentation

• Segmentation
• 1 significant in market and sales analysis
• - better understanding of customer needs
• - closer definition of competitors and
  identification of market opportunities
• 2 significant in strategy development
• - major aspect of strategic focus
• - related to strategic fit and company match to
  environment
• 3 significant in marketing operations
• - better target definition
• - more efficient promotion
• - products match market requirement
• - better aligned marketing channels and tighter
  control

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Strategic Positioning and Segmentation

• Segment basis must be
• measurable
• accessible
• stable
• reasonable size

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Strategic Positioning and Segmentation

• Consumer market variables
• geographic
• demographic
• age, sex, family size, income, occupation,
  education, social class, geodemographic
• psychographic
• lifestyle, personality, attitudes, interests,
  opinions
• behavioural
• locations, benefits, usage, loyalty

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Strategic Positioning and Segmentation

• Segmenting industrial markets
• background company characteristics
• industry type, company size, customer location,
  company technology, customer capabilities,
  purchasing organisation, power structures,
  purchasing policies, product application
• attitudinal characteristics
• behavioural characteristics
• buyers personal characteristics (motivation,
  risk perceptions, buyer-seller similarity or
  compatibility in technology, corporate culture,
  company size etc)
• product/brand status and volume

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Strategic Positioning and Segmentation

• For positioning studies (product usage, product
  performance, benefits sought, a hybrid of these
  variables)
• For new product concepts and new product
  introductions (reaction to new concepts -
  intention to buy, preference over current brand,
  benefits sought)
• For pricing decisions (price sensitivity, deal
  proneness, price sensitivity by purchase/usage
  patterns)
• For advertising decisions (benefits sought, media
  usage, psychographic/lifestyle, a hybrid of these
  variables)

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Strategic Positioning and Segmentation

• Increasing importance of segmentation?
• Maturing product-markets (growth by winning
  market share by adapting to segment needs, e.g.
  baby napkins)
• Wealthier sophisticated consumers (new needs,
  tastes, lifestyles)
• New manufacturing technology (CAD/CAM allows
  greater customisation)
• New targeting technology (GIS, including
  geodemographics, hardware, software and
  databases)
• New media (broadcast and narrow-cast,
  terrestrial and cable TV, digital TV, radio - new
  commercial channels, digital)

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Strategic Positioning and Segmentation

• The changing consumer - four core trends
• autonomy of the individual (more emphasis on
  self-employment, creative leisure, equal
  opportunities)
• tolerance, empathy, feeling (greater need to
  understand feelings, greater home-centredness,
  identification with small communities)
• diffusion of authority (complex society,
  expansion of role sharing, blurring of existing
  structures)
• decline of materialism