Chap 006

CRAVENS PIERCY

8/e McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Chapter Six Market Targeting and Strategic Positioning

McGraw-Hill/Irwin

© 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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Market Targeting and Strategic Positioning Market Targeting Strategy  Targeting in Different Market Environments  Positioning Strategy  Developing the Positioning Strategy  Determining Positioning Effectiveness 

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MARKET TARGETING STRATEGY The Marketing Targeting Decision Identities the People or Organizations in a Product-Market Toward Which a Firm Directs Its Positioning Strategy Guided by an understanding of: •The product-market •Its buyers •Firm’s capabilities and resources •Competition

Mar ke t Ta rg eti ng and S tr at eg ic Posi ti oni ng 

Core dimensions of market-driven strategy: deciding which buyer’s to target and how to position the firm’s products

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Effective targeting and positioning strategies are essential in gaining and sustaining superior performance

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SEGMENTS VALUE OPPORTUNITES CAPABILITIES/ SEGMENT MATCH TARGET(S) POSTIONING FOR EACH TARGET

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Identify segments within the product-market

TARGETING AND POSTIONING Decide and implement a positioning strategy for each targeted segment

Decide which segment(s ) to target

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Mar ket Targe ti ng Alt ern ati ves Segments Clearly Defined

Selective Targeting

Target Selected Niche(s) Product Specialization

Target Multiple Segments Product Variety

Differentiated But Segments Not Clearly Defined

Extensive Targeting

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Fa ctors Inf luenci ng Ta rgeti ng Stage of product Dec isi ons – market maturity

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Extent of diversity in preferences

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Industry structure

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Capabilities and resources

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Opportunities to gain competitive advantage

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TARGETING IN DIFFERENT MARKET ENVIRONMENTS  Emerging

 Fragmented  Transitional  Declining  Global

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Eme rgin g Ma rket

Buyer Diversity – Segmentation limited due to similarity of buyers’ preferences Industry Structure – Typically small new organizations – Limited access to resources Capabilities and Resources – Unique benefit (differentiation) strategy rather than low-cost – First-mover advantage Targeting Strategy – Single target or a few broad segments

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INNOVATION FEATURE

An Emerging Market for Satellite Radio Services

SATELLITE RADIO POWERS UP Satellite radio is catching on., with some 700,000 subscribers today and forecasts for 1.5 million by year end. WHAT IS SATELLITE RADIO? These systems bean CD-quality signals from space to special radios, most of which are installed in cars. Customers can also listen at home or on the go. WHERE IS IT AVAILABLE? Two carriers offer nationwide coverage. XM, based in Washington, D.C., is $19.99 a month; Sirius, based in New York, is $12.95 WHAT DO YOU GET? The services offer about 100 channels. Sirius is commercial-free, while XM broadcasts a limited number of ads. Programs range from music to news to comedy. WHO IS BACKING SATELLITE RADIO? Carmakers, who are eager for a stake in a new, fast-growing business. GM funded XM, and Daimler-Chrysler is backing Sirius. Others are picking one of the two technologies, which are not currently compatible.

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DO MOST CARS HAVE SATELLITE RADIO? The systems are available on many new models for about $300. Within two years, satellite radio is expected to be available on many new cars. WHAT ABOUT HOME AND PORTABLE SYSTEMS? You can buy a palm-size receiver from Sirius or XM. They are available from retailers like Circuit City and Wal-Mart for about $200, including adapters. You can carry these, using them at home or in the car. For an additional $99, XM’s can be used with a special portable boom box.

XM has the lead position in the market but faces major financial challenges, and is spending $20 million in cash each month. With less than 1 million subscribers, XM needs 7.5 million and $1 billion in revenues to cover capital and interest costs.

Source: “This is the Dawning of the Age—XM?”, Business Week, July 7, 2003, 90-92.

Gro wt h Ma rket Buyer Diversity

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– Segments should exist

Industry Structure – Numerous competitors

Capabilities and Resources – Survival requires aggressive actions by firms that seek large market positions – Otherwise select one or a few market segments

Targeting Strategy – Three possible strategies  Extensive market coverage by firms

with established businesses in related markets  Selective targeting by firms with diversified product portfolios  Very focused targeting strategies by small organizations serving one or a few market segments.

Strateg ies for Ma ture Markets

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Buyer Diversity

– Segmentation essential for competitive advantage

Industry Structure – Intense competition for market share – Emphasis on cost and service, and pressures on profits

Capabilities and Resources  Management’s objectives: cost

reduction, selective targeting, product differentiation

Targeting Strategy  Firms pursuing extensive targeting strategies may decide to exit from certain segments

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Gl obal Markets Global Reach and Standardization – Identify market segments that span global markets and serve these needs with global positioning strategies

Local Adaptation – Consider requirements of domestic buyers – Buyers’ needs and preferences affected by social, political, cultural, economic, and language differences

Industry Structure – Restructuring, acquisitions, mergers, and strategic alliances altering industries and competition

Targeting Strategy – Targeting a single country, regional (multinational) targeting, or global targeting

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POSITIONING STRATEGY Deciding the desired perception/ association of an organization/ brand by market target buyers…and designing the marketing program to meet (or exceed) buyers’ value requirements.

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POSITIONING CONCEPT The desired positioning of the product (brand) by targeted buyers

MARKET TARGET POSITIONING EFFECTIVENESS The extent to which positioning objectives are achieved for the market target

POSITIONING STRATEGY The combination of marketing actions used to communicate the positioning concept to targeted buyers

Positio nin g i n Pe rsp ective 

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Objective – Match the organization’s distinctive capabilities with the customer value requirements in each market target (How do we want to be perceived by targeted buyers?)

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Desired result – Gain a relevant, distinct, and enduring position that is considered important by the targeted buyers

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Actions by the organization – Design and implement the positioning strategy (marketing program) for the market target.

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The Perception or Association that Management Wants Buyers to Have Concerning the Brand Symbolic

Functional

POSITIONING CONCEPT Experiential

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DEVELOPING THE POSITIONING STRATEGY The Positioning Strategy Places the Marketing Program (mix) Components into a Coordinated Set of Actions Designed to Deliver Superior Customer Value PRODUC T VALUE CHAIN

PROMOTION PRICE

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Positioning Issues 1. The positioning concept

applies to a specific brand rather than all the competing brands that compose a product classification 2. The concept is used to guide positioning decisions over the life of the brand 3. Multiple concepts are likely to confuse buyers and may weaken the effectiveness of positioning actions

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The positioning strategy indicates how (and why) the product mix, line, or brand is to be positioned for each market target. This strategy includes: •The product strategy, indicating how the product(s) will be positioned against the competition in the product-market. •The value chain (distribution) strategy to be used. •The pricing strategy, including the role and positioning of price relative to competition. •The advertising and sales promotion strategy and the objectives these promotion components are expected to achieve. •The sales force strategy, direct

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DETERMINING POSITIONING EFFECTIVENESS The marketing offer (product, distribution, price, and promotion) is both distinct and valued in the minds of the customers in the market target.

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Customer and Competitor Research

Methods for Determinin g Positioning Effectivene ss

Analytical Positioning Models

Test Marketing

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Customer and Competitor Research – Research Studies – Preference Maps

Test Marketing – Generates information about commercial feasibility and marketing program – Provides market (sales forecasts) and effectiveness measures

Positioning Models – Incorporates research data into formal models of decision analysis

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Po sit ionin g Er rors

Under-positioning – customers have only vague ideas about the company and do not perceive anything distinctive about it Over-positioning – Customers have too narrow an understanding of the company, product, or brand Confused positioning – Frequent changes and contradictory messages confuse customers Doubtful positioning – claims made for the product or brand are not regarded as credible

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Posi ti oni ng in Perspecti ve 

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Positioning is a central part of business strategy Positioning analysis starts with an understanding of the value proposition for the target segment Value-driven positioning is the objective Positioning seeks to differentiate the organization’s offer from the competition Positioning seeks to create a unique perception in buyers’ minds of the target market segment Positioning is the unifying dimension of market-driven strategy

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Positioning usually means that an overt decision is being made to concentrate only on certain segments. Such an approach requires commitment and discipline because it’s not easy to turn your back on potential buyers. Yet, the effect of generating a distinct, meaningful position is to focus on the target segments and not to be constrained by the reaction of other segments. Source: Aaker and Shansby, Business Horizons, May-June 1982, 61.

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Illustrative Impacts of Changes in Business Strategy Restructuring on Targeting and Positioning Strategies Changes in Business Strategy Rapid Growth/ Retrenchme nt

Market Targeting Impact Market scope may not change although targets may be increased or reduced.

Positioning Impact Substantial changes in resource allocation, (e.g. advertising expenditures

Changing the Product Mix

No change is necessary unless increase in product scope creates opportunities in new segments.

Changes in product strategy, methods of distribution, and promotional strategies may be necessary.

Changing the Market Scope

Targeting is likely to change to include new targets.

Positioning strategy must be developed for each new target.

Repositioning

Should not have a major effect on targeting strategy.

Product, distribution, price, and promotion strategies may be affected.

Value Chain Integration

Should have no effect on targeting strategy.

Primary impact on channel, pricing and promotion strategies.

Targeting strategies must be selected in new business areas.

Positioning strategies must be developed (or acquired for the new business areas.

Targeting strategy may be affected based on the nature and scope of the alliance.

Operating relationships and assignment or responsibilities must be established.

Diversification

Strategic Alliance

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Targeting and Positioning Product Strategy Positioning Strategy Promotion Strategy

Market Target

Price Strategy

Distribution Strategy