attitudinal segmentation – survey method 1.whom to interview. in a survey of finding segments of...
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Attitudinal Segmentation – Survey Method
1. Whom to Interview.In a survey of finding segments of customers who are travelers / touriststo Europe, it is not appropriate to count only those who have been toEurope, because that accounts for a small percentage. You have totalk to potential travelers
2. Frame of reference for questioningWhen you are questioning customers on vacations do you take (a) overallexperience of vacations (b) last vacation
3. Find different ways of segmentationFor example : Vacation to Europe, segment on (a) Favourability towardsEurope (b) Segmenting on Income brackets © segmenting customersbased on desires sought on their last vacation
In a study on 1750 interviews for vacationing the following segments wereUncovered – (1) visit friends and relatives segments (2) good for family sight-Seeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer
Shell’s Customer Segmentation study Methodology
•Surveyed 5000 respondents in 6 markets.•Questions included * Behavior patterns * Desired Features * Frustrations * Brand Ratings * Psychographics * Demographics
* Statistically identified 10 distinct “Clusters” of customers with different needs/ attitudes
•Studied Survey results from each cluster•Developed name and personality for each cluster
Source: Wharton School
Shell Customers Target Segments and Characteristics
Premium speedsters13%
Struggling survivors 9%
Value minded Planners 6%
Safety firsters 6%
Sentimentalist 13%
Comfort Zoners 15%Relationship shoppers 13%
Low octane communicators 7%
Hands-on individualists
12%
Simplicity seekers 11%
Source: Wharton School
Segments selected Premium speedsters
Simplicity 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
Personality : Internally driven, CompetitiveMentalityGas Purchasing : Fast pumps, quick accessIn a word: Power minded
Brand Identities Considered
One stop convenience(Value minded planners,
struggling survivors)
Friendliest Service(Relationship Shoppers,
Comfort Zoners)
Community support(Comfort Zoners)
Lowest Price(Low octane commuters,
Sentimentalists)
Best Gasoline performance
(Hand’s on individuals, premium speedsters)
Quick & Easy
(Premium speedsters, simplicity seekers, safety firsters)
Source: Wharton School
Market Targeting
Market Targeting
Single Segment ConcentrationZodiac concentrating on executive and professionals
Selective Specialization – may be or may not beSynergy among the segments selected
HLL in Soaps
Product specialization - Specialized product to several segments – TVS makes scooters of allranges to several socio-economic classes
Market specialization – Serving many needs ofa single customer group. Financial services toNRIs
Full Market Coverage - General Motors,
What is Positioning
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 – (flavor
or foaminess of toothpastes)
Positioning a brand is obtaining mind-space of the consumer for the brand withRespect to competition
Positioning 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 the Potential benefit to the firm. The result of positioning is the successful creationOf a customer focused value proposition
e.g. – Colgate Total – Multi-benefit toothpaste as a one product solution forpeople with tooth problems
As against Colgate Dental Cream – Core Identity for strong, white teeth meaninga toothpaste to maintain healthy teeth.
Jack Trout issues on Positioning
1. Embrace the obvious position possible in the market or granted by themarket. Positioning should be in line with the perception of consumers’ mind not against it
Coke: ‘The Real Thing’ is fine; it is the original colaCoke: Always Coca-Cola may not be fine as half the market is Pepsi
2. Many positioning ideas are founded on how company estimates the future
Samsung – Challenging Limits – Looks alrightAvis: We are No.2. We try harder
3. Be Simple: Volvo – Drive Safely
4. Positioning is long term. Do not be driven by the stock market
Kotler et.al on Positioning
Steps to a Positioning Strategy
1. Determine Target Market
Laptop for the business professional
2. Determine category membership of the brand under consideration
Hewlett Packard dv1000 is a sophisticated business laptop
3. Identify the competition
Sony, Toshiba
4. Establish the Category Points of Parity to fulfill the necessary conditionsof category membership
there are three main ways to convey a brand’s category membership- announcing category benefits
centrino mobile technology
- comparing to exemplarson par with HP’s excellence in instrumentation
- relying on the product descriptorHP Pavillion dv1000 is an entry level business
laptop
5. Establish the Competitive Points of Parity to establish the equivalence ofProduct benefits, attributes, values with respect to competition
HP’s manufacturing quality is no way behind Sony or Toshiba. It isbacked by decades of manufacturing electronic systems
6. Establish the Points of Difference if any to take a differentiated positionIf no POD exists then the brand takes a head on position or a me-too position
HP has an excellent service network in India as compared to Toshiba.HP is not as expensive as Sony
7. Write out the Positioning Statement
To 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 with Excellent service backup.
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
(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 upgrades
In this case PODs are anchored at the benefit level, sometimes they could be Anchored at the attribute or value level
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.
Methods to overcome such situations
- Go for straddle positioning – do both simultaneously. BMW designed its car for both luxury and performance
- Present the communication messages for each attribute / benefit Separately
- 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 that had 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.
Differentiation
It is the process of adding a set of meaningful and valued differences toDistinguish a company’s offering from competitor offerings
A difference will be stronger if it satisfies one or more of the following criteria
1. Important - Infrastructure investment of business school
2. Distinctive , but not necessarily superior - Bajaj scooter
3. Superior - Product superiority of Gillette
4. Preemptive - cannot be easily copied - Zilog Processor
5. Affordable - Personal Computer of Acer
6. Profitable - MTR’s food products
Dimensions on which differentiation can be achieved by firms
1. Product / Services
2. Personnel
3. Channel
4. Image
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 wear
Services- Ordering ease – home delivery pizzas- Installation – Mobile- Customer Training – GE Medical Systems- Customer Consulting - Saree selling- Maintenance and repair – Premium apartments in the city.
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
Channel
- Coverage – HLL
- Expertise – Avon
- Performance - Caterpillar
Image
- Differentiate Identity – Mysore Sandal Gold vs Dove
- Differentiate Logo, colors, slogans, events and sponsorships – Coca-Cola
Products, New Product Development Process, Branding
a. Corporate product portfolio including mergers and acquisition decisions and changing portfolio
b. SBU product portfolio including design of new product development process and product deletion decision
c. Product line positioning, width and depth of product line, product modification
d. Brand positioning
Factors affecting product decisions
- the consumer- the competitors- the environmental factors- firm’s own objectives and resources
Illustrative Product decisions
Understanding Products
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 - physical goods (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)
Core benefit - Transport
Analysing the Five Product Levels – Indica Automobile
Basic Product - 4 wheel closed car
Expected product - good performance - all specsin the ad in small letters
Augmented product - wants beyond expectations - best after sales service even though not required
Potential product - possible evolution for the car of tomorrow
CUSTOMER VALUE HIERARCHY
Classification of productsdurability, tangibility basis
durables, nondurables/consumables, services
use basisconsumer, industrial, military, government
Industrial goods raw materials and parts
natural and manufactured raw material, components, subassemblies/modules, semi-knocked down kits
capital items Installations - buildings and plant Equipment - portable factory equipment and office equipment turnkey projects
supplies / consumables and business services operating supplies (paper, lubricants); maintenance/repair items
(paint) and maintenance / repair service(Copier repair), business advisory services (legal, management
consulting, advertising)
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 or brand identification - cars, cameras
Unsought goods - Special selling effort reqd - encyclopedias, life insurance .
Product Hierarchy
Need Family: Personal Transport
Product Family: Automobiles
Product Class: 4 wheelers
Product Line: Passenger cars
Product Type: Mid size car
Brand: Maruti
Item: Esteem AX
Product mix width - partial
Deodorants
Bar Soap
Coffee
Detergents
Tooth paste
IvoryCamayLavaKirk’sZestSafeguardCoastOil of Olay
Product Line length for Bar soaps
GleemCrest
Product Line length for Toothpaste
P&G Product-Mix vs Product lineCrest comes in twoformulations andthree sizes and so has a depth of six
P& G’s product lines are consistent(closely related to each other) in distribution
PRODUCT SYSTEM – PC +PRINTER+ OPERATING SYSTEM + APPLICATION S/W + MOUSE
Major elements of managing products
Product Life Cycle
Product Portfolio Analysis
Objectives of Product Portfolio Analysis
Product Line Management
Product Life Cycle
Making the PLC Operational / Issues to Look at PLC
1. Unit of Analysis – Product Class, Product Form, Product Line…..
2. What is the relevant market to which the PLC appliesRelevant Product Market + Relevant Geographic Market
3. What is likely lifecycle pattern to emerge- fad, fashion, style, cycle-recycle, staple
4. Identifying the product’s stage in the PLC Model
5. Unit of measurement of PLC – unit sales, rupee value
6. Develop PLC on weekly, monthly, quarterly or annual data
Empirical Generalization: Always (Almost)Looks Like a Bass Curve
Adoption of VCR’s
Actual and Fitted Adoption VCR's1980-1989
0
2000
4000
6000
8000
10000
12000
80 81 82 83 84 85 86 87 88 89
Year
Ado
ptio
n in
Tho
usa
nds
Actual Adopt ion
Fitted Adopt ion
Color TV Forecast 1966
Color TV
0
1000
2000
3000
4000
5000
6000
7000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
Sal
es
(x
1000
)
Sales
Predicted
Peak in1968
Industry BuiltCapacity For14 million units
An Empirical Generalization
Adoption of Answering Machines1982-1993t
0
2000
4000
6000
8000
10000
12000
14000
82 83 84 85 86 87 88 89 90 91 92 93
Year
adoption of answering machines Fitted Adoption
Another Example 35 mm Projectors
Actual and Fitted Adoption of 35 mm Projectors, 1965-1986, m=3.37 million, p=.009,q=.173
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86
Year
Un
its
35mm Proj Fitted
Actual and Fitted Adoption of OverHead Projectors,1960-1970,m=.961 million,p=.028,q=.311
0
20000
40000
60000
80000
100000
120000
1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970
Year
Un
its Overhead Proj
Fitted
Another Example: Overhead Projectors
Capture Law- DRAMSNorton and Bass: Management Science (1987)
Sloan Management Review (1992)
Four Generationsof DRAMS: 4K, 16K, 64K, 256K, 1sr Quarter 1974-4th Quarter 1985, Actual and Fitted Shipments, p=.0037, q=.3369
0
50
100
150
200
250
300
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43
Quarter
Th
ou
san
ds
4K-A 4K-F 16K-A 16K-F 64K-A '64K-F 256K-A 256K-F
Capture Law-Mainframes-Beautiful!
Generations of Mainframe Computers (Performance Units) 1974-1992
0
20000
40000
60000
80000
100000
120000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Year
Sa
les
Gen1 Actual Gen1 Fit and Forecast Gen2 Actual Gen2 Fit and Forecast
Gen3 Actual Gen3 Fit and Forecast Gen4 Actual Gen4 Fit and Forecast
World Wide Sales of Generations of Desktop PC's
0
2
4
6
8
10
12
14
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Year
Un
it S
ale
s in
Mil
lio
ns
8 Bit 16 Bit 32 Bit
Generations of PC’s
Effects of Different Prices
GBM-Diffusion Under Two Different Pricing Schemes
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Time
Sa
les
(A
do
pti
on
)
10% Below Baseline Prices Baseline Price
Product Portfolio Analysis
Objectives of Product Portfolio Analysis
1) Resource allocation among products and markets2) portfolio analysis of competitors leads to a refined understanding of competitive strategy by action –
reaction steps3) Assess the marketing effort for each product to direct it in the product portfolio from one place to another
Boston Consulting Group- Growth share matrix.
STARS PROBLEM CHILD
CASH COW DOG
MARKET
GROWTH
RELATIVE MARKET SHARE
High
Low
High Low
Shell International directional policy matrix
Prospects for sectors profitability
Unattractive Average Attractive
Company’s
Competitive
Capabilities
Weak Disinvest Phased withdrawal custodial
Double or quit
Company’s
Competitive
Capabilities
Average Phased withdrawal
Custodial
Growth Try harder
Company’s
Competitive
Capabilities
Strong Cash generation
Growth leader
leader
Competitive capabilities- Market position - Production Capability - Product R &D
Mc Kinsey/GE Business ArrayIndustry attractiveness – Size, Market Growth, Pricing, Mkt. Diversity
Competitive Structure, Industry Profitability
Business strength
- Size
- Growth
- Share
- Position
- Profitability
- Margins
- Tech.
Position
- Image
- People
High Medium Low
High Investment and growth
(G)
Investment and growth
(G)
Selectivity/
Earnings
Medium Investment and growth
(G)
Selectivity/
Earnings
Harvest
Low Selectivity/
Earnings
Harvest Harvest
Product performance matrix
Company sales Decline Stable Growth
Industry sales
Profitability
MKT share
Below target
Target Above Target
Below target
Target Above
target
Below target
Target Above
target
Growth Dominant
average
Marginal
Stable Dominant
average
marginal
Decline Dominant
average
Marginal
Product Line Management
Product Line analysis
Product line length management
Product Line Analysis
Study sales and profits of each item in line, to seeWhich to build, maintain, harvest, divest. Do ABCAnalysis on sales / profits
Core products – Basic Computers – low marginsStaples – CPUs, Memory chips – higher marginsSpecialties – digital movie equipment – still higher
marginConvenience items – monitors, printers –high volume
high margin
Manage each of the above four types of products differently
Market 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
Product Line Length Management
Product line objectives would be to induce both up selling and cross selling
High Market share seeking firms will have longer product lines. Highprofitability seeking firms will have shorter lines of important /more profit product items.
Product line length Management
Line stretching
Upward – Maruti – 800, Omni, Esteem, Baleno, Toyota - Lexus
Downward – Surf – Wheel
Two way - Rural Transport Vehicle – Ambassador – Mitsubishi Lancer(Hindustan Motors)
Texas Instruments in Hand Calculator
Line Filling (each item should produce a just noticeable difference)
TVS50 --- TVS Scooty --- TVS SUZUKI Mobike
Line Featuring: (oft promoted brand in line)
Lux in Soaps for HLL
Line modernization – Intel in Microprocessors
Line Pruning – First Ruf & Tuf ready to stitch kits. Later Ruf & Tuf Jeans
Developing New Products
Firm end
New Product Development Process
Consumer end
Consumer Adoption Process
New Product Development Process
Make or Buy Decision
Issues to New Product Development
Steps to New Product development Process
Factors for success of new product launches
New Product Strategies - Reactive and Proactive
Some reasons for new product failures
Make or Buy Decision
Considerations
1. Timing Considerations
2. Superiority of ‘Buy’ technology
3. Cost considerations
4. Management, Legal and Market feasibility