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SEGMENTATION , PLANNING Module -3

AND PRODUCT MANAGEMENT

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BUSINESS SECTOR
 The business market consists of 3 broad sectors:

1. Commercial Enterprises
2. Institutions
3. Government

 Each sector has many segments

 Each segment has a unique need and requires a unique
marketing strategy

MARKET SEGMENTATION
Market People or organizations with
needs or wants, the ability to purchase and the
willingness to buy.

Market A group of present or potential customers with

Segment some common characteristics which we can
explain (predict) their actions when subjected to
marketing stimuli.

Market The process of dividing a market into meaningful,

Segmentation relatively similar and identifiable segments or
groups.

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WHAT KEY CRITERIA BEST DEFINE A UNIQUE

MARKET SEGMENT?

• Measurability

• Accessibility

• Substantiality

• Responsiveness

ART OF SEGMENTATION
Segmentation involves identifying groups of customers
or business groups that are…

1. Large enough
2. Unique enough
3. Financially independent enough
4. Reachable enough

…to justify a separate marketing strategy.

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MISSED OPPORTUNITIES – THREE

CUSTOMER GROUPS
1. Undershot customers - Existing solutions fail to meet their needs,
resulting in:
a. a purchase of new product versions
b. at steady or increasing prices.

2. Over Shot Customers - Existing solutions are too good, thus customer
is reluctant to purchase new version.

3. Non-Consuming Customers – Customers who lack resources, skills or

ability to benefit from existing solutions.

BENEFITS OF SEGMENTATION
Auto tune to the unique need of the customer segment
Focus Product – development efforts
 Profitable pricing strategies
 Appropriate channel of distribution
 Develop and target advertising messages
 Train and deploy sales force

Provides valuable guidelines for allocating of marketing resources

 Monitor relative attractiveness and performance
 Cost , revenue and profits must be evaluated segment wise

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CONSUMER VS. BUSINESS PROFILING

 Consumer-goods marketers are interested in meaningful
profiles of individuals concerning:
 Demographics
 Lifestyle
 Benefits sought

 Business marketers profile:

 Organization size
 Organizational buyer’s decision styles & buying criteria

 Two broad classifications for commercial markets:

◦ Micro & Macro Segmentation

BUSINESS MARKETING SEGMENTATION

Geographic

Customer Type
Macro-
segmentation Customer Size

Product Use
Business
Markets
Purchasing Criteria

Purchasing Strategy
Micro-
segmentation Importance
Personal
Characteristics

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https://nomoreofmore.com/collections/hobo
s-shoulder-bags

MACRO-LEVEL BASES
To find viable macro-segments, it is useful to partition buying organizations
into smaller groups based on certain criteria.

Criteria include:

1. Characteristics of the buying organization

2. Product service application
3. Characteristics of purchasing situation

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TYPES OF BUYERS

First-Time Prospects: customers who see a need but have not

purchased

Novices: First-time purchasers who’ve purchased in the past 3 months

Sophisticates: Experienced customers ready to buy/rebuy

MICRO-LEVEL BASES
Once macro-segments are identified, the next step
is to divide each macro-segment into smaller
meaningful micro-segments.

Often, several micro-segments are buried within

macro-segments.

To isolate them, marketers need to move to

primary sources of information from:
 Salespeople
 Present Customers

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SELECTED MICRO-LEVEL BASES OF SEGMENTATION

Developed by Cool Pictures and MultiMedia Presentations Copyright © 2007 by South-Western, a division of Thomson Learning, Inc. All rights reserved.

CHOOSING MARKET SEGMENTS

As you can see, there are numerous steps to choosing market segments.

We start by analyzing key characteristics of the organization and of the

buying situation (macro-dimensions) to identify, evaluate and select a
meaningful macro-segment.

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SEGMENTATION MODEL
1. Identify key characteristics (macro-segments) based on
organizational characteristics (e.g.: size)

2. Consider the buying situation in terms of macro-dimensions (i.e.,

Where are they in the procurement cycle – new task, rebuy,
modified rebuy?)

SEGMENTATION MODEL
3. Select set of acceptable macro-segments based on corporate objectives
and resources.

4 Evaluate each segment that possesses distinct needs, is open to a

distinct message and is responsive to your marketing program.

5. If Step 4 is successful, select macro-segment as the target market and

complete a cost/benefit analysis for marketing to it.

Is it worthwhile?

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BUSINESS MARKETING PLANNING-

STRATEGIC PERSPECTIVE

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EFFECTIVE STRATEGIES

Effective strategies share a:

A. Responsiveness to market needs
B. Ability to exploit the organizations special competencies
C. Ability to make valid assumptions about environmental trends
D. Ability to take advantage of competitive behavior
E. Realistic basis for securing and sustaining a competitive advantage

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MARKET-DRIVEN ORGANIZATIONS

Market-driven organizations are:

Centered on customers

Take an outside-in view of strategy

Demonstrate an ability to sense market trends ahead of their

competitors

HIERARCHY OF STRATEGIES – 3 PARTS

✓Corporate Strategy

✓Business-Level Strategy

✓Functional Strategy

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HIERARCHY OF STRATEGIES – PART 1

Corporate Strategy
What businesses are we in?
What are our core competencies?
How should we allocate resources?
What businesses should we be in?

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CORPORATE STRATEGY
At this level, the role of Marketing is to:

a) Assess market attractiveness and competitive effectiveness

of the firm

b) Promote customer orientation to management

c) Formulate the company’s overall value proposition that is

marketed to the customer, management and employees

BUSINESS STRATEGY

Resources
Core Competencies
Capabilities
Partners resources

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Capabilities : To take full advantage of its assets the

organization needs to develop skills .

 Two organization with similar assets can have different value and this
differences is in their capabilities to utilize assets .

Competencies : It refers to the ability to perform …

refers to the critical bundle of skills that an organization
can draw on to distinguish itself from competitors

HIERARCHY OF STRATEGIES – PART 2

Business-Level Strategy
How do we compete in a given industry?
How should we position ourselves against
competitors?

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BUSINESS-LEVEL STRATEGY
The focus is on how firms compete in a given industry.

Competition is not between large corporations. It is between

individual business units (SBUs) that compete in specific markets.
Each SBU needs to develops its own business and marketing plans
to answer:
✓How can we compete?
✓How and what is the most efficient way to get to the
market?
✓What are our distinctive skills?

HIERARCHY OF STRATEGIES – PART

3
Functional Strategy

 How can we allocate resources to most efficiently and

effectively support business-level strategies?

 How can we use resources to meet the firm’s

objectives within a specific product market?

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CROSS-FUNCTIONAL CONNECTIONS EXPLORE INTERRELATIONSHIPS

BETWEEN MARKETING AND FOUR BUSINESS FUNCTIONS

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INTER-FUNCTIONAL INVOLVEMENT IN MARKETING DECISION MAKING:

AN ILLUSTRATIVE RESPONSIBILITY CHART
Organizational Function
Decision areas Marketing Manufacturing R&D Logistics Tech. SBU Corp. Level
Services Manager Manager

Product
Design specifications
Performance character.
Reliability

Price
List/Discount

Tech. Services
Customer training

Logistics
Inventory
Customer service level

Sales Force
Training

Advertising
Message development

Channel
Selection

Decision role: R=Responsibility; A=Approval; C=Consult; M=Implement; I=Inform,

X=No Role
Vocabulary

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BUSINESS MARKETING STRATEGIES FOR

GLOBAL
MARKETS(CAPTURING GLOBAL ADVANTAGE,
MODE OF ENTRY TO INTERNATIONAL
MARKETS)

GLOBAL COMPETITION IS HERE

Huge international firms, which are relatively unknown
here, are challenging US companies in almost every
global setting.

B2B marketing is world wide and the very existence

of many companies will be decided by its ability to:
1. Act decisively
2. Compete aggressively
3. Seize market opportunities

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RAPIDLY DEVELOPING ECONOMIES (RDE)

▪RDEs are emerging as serious competitors in world markets. Their
advantages are labor costs and, in some cases, abundant raw
materials.

▪80% of the world’s population is located in RDEs [i.e., China,

India, Mexico, South America (Brazil), Eastern Europe and Russia].

▪Hundreds of millions of people are now considered middle class

and form a significant market.

▪There are 25 world-class emerging multinationals. By 2025,

there will be at least a 100.

Figure 6.1 The BCG Global Advantage Diamond

Growth advantage

Market
access

Network Local
Integration advantage “Manyness” advantage
coordination adaptation

Resource
access

Resource leverage advantage

Source: BCG analysis.

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INTEGRATED STRATEGIES INCLUDE:

•Market access: driving sales growth by reaching new

markets and targeting new market segments.

• Resource access: leveraging valuable resources (for

example, talent, assets, raw materials, and knowledge) in
RDEs to achieve competitive advantage

• Local adaptation: developing and adapting products and

services to satisfy the unique needs of RDE customers

• Network coordination: integrating operations to capitalize on

the strength of the company’s global network.

LOCAL ADAPTATION

Shift power to where the growth is.

Build new offerings from the ground up.
Build LGTs from the ground up, just like forming a new
company.
Customize objectives, targets, and metrics for the RDE
environment.
Provide senior executive support to the LGT, including a
direct reporting link to senior management

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NETWORK COORDINATION

❑Share best practices

❑Standardize processes
❑Resource advantages developed in different markets can
be shared and diffused to other operating units around the
world
❑Take innovations developed in RDEs back to developed
markets

ENTERING THE GLOBAL MARKETPLACE

Sell domestically-produced products to
buyers in other countries

Management Includes management and manufacture

Contracting contracting from making to assembling

A business relationship between two or more

Strategic Alliance firms to cooperate through mutual need
Domestic firm buys/joins a foreign company
Joint Venture to create new entity
Companies work together to find a balance
Multidomestic between local adaptation & global optimization
A business relationship established to cooperate
Global Strategy
out of mutual need and to share risk

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RISK LEVELS
Risk

Global
Strategy
Multi-
domestic
Joint
Ventures
Strategic
Alliances
Contracting

Export

Return

MANAGING PRODUCTS FOR BUSINESS MARKETS

(BRANDING, PRODUCT, POSITIONING)

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BUILDING A STRONG B2B BRAND

Companies need to ask:

1. What do you want your company name to stand

for?

2. What do you want it to mean in the customer’s

mind?

BRAND & BRAND EQUITY DEFINED

 Brand
Name, sign, symbol, logo or anything that identifies and
differentiates the product from competitors

 Brand equity
Set of brand assets and liabilities linked to a brand; it
can add to – or detract from – the value of the brand

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CUSTOMER-BASED BRAND EQUITY (CBBE)

Kevin Lane Keller defines CBBE:

The differential effect that customer brand knowledge has on their
response to market activities and programs for the brand.

Brand Power relies on:

 What customers have learned, felt, seen and heard about the brand
over time.
 How customers link their thoughts to feelings, perception, imagination
and experience of the brand.

CBBE PYRAMID
CBBE model lays out 4 steps for building a strong brand:

1. Develop deep brand identity

2. Establish unique brand identity by highlighting differences
3. Employ marketing programs to elicit positive brand responses
4. Build brand relationships with loyal customers

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CBBE PYRAMID

Marketing programs

Point of difference

BRAND IDENTITY
•To achieve brand identity, marketers must create:
✓Brand salience – something prominent about the product , cues and
reminderdoes a customer need to recognize a brand?
✓Brand awareness – ability to recall or recognize the brand under
different conditions , understand the particular product or service
category

•Marketers need to create a clear connection between

the product and the brand name in markets where the
product competes.

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BRAND POSITIONING
•Establishes an association in the customer’s mind that
differentiates the brands’ meanings

•There are various brand associations

•
1. Brand Performance – the way(s) a
product/service meets customers’ functional
needs
2. Brand Imagery – The way(s) a brand meets
customers’ psychological or social needs

• Brand positioning should incorporate both points

of parity (breaks even to other brands) & points of
differences.

BRAND RESPONSE: CONSUMER JUDGMENTS

Consumer Judgments:
1. Quality: Customer’s attitude towards brand’s perceived quality
with respect to value and satisfaction

2. Credibility: Customer perceives brand to be credible with respect

to expertise, trustworthiness & likeability

3. Consideration set: Extent to which customer finds brand a viable

option and worth consideration

4. Superiority: Extent to which customer believes that brand offers

advantages over competitive brands

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BRAND RESPONSE: CONSUMER’S FEELINGS

•Consumer feeling – a consumer’s emotional

reaction to a brand

•Numerous feelings can be tied to brands, i.e.:

–Warmth
–Fun
–Excitement
–Security
–Power
–Sexiness
–Functionality

CONSUMER BRAND RESONANCE

Final step is brand resonance, which means forging
a relationship. This connection translates into:
 Brand loyalty
 Attachment
 Active engagement
 Word-of-mouth satisfaction & advertising

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PRODUCT QUALITY AND CUSTOMER

VALUE
Customer value – Business customer’s overall assessment of a
relationship with a supplier based on perceptions of benefits and
scarifies made.

BENEFITS & SACRIFICES

Benefits:
1. Core – requirements a product must possess for a
relationship to exist.
2. Add-ons – attributes that create differentiation &
provides more value than competition.

Sacrifices:
1. Price
2. Acquisition costs (e.g., ordering costs)
3. Operations costs (Can defect free parts really lower
operation costs?)

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Managing Innovation and New Industrial Product

Development

RISK, REWARD & FAILURE

But, the risks of product innovation are high, significant investment is

required, and the likelihood of failure is high.

However, due to…

 Shorter product life cycles
 Accelerating technological advances,

…Speed & Agility is central to success.

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INNOVATIONS START OUT CHAOTIC

There are two broad categories of strategic behavior:
Induced
Autonomous

INDUCED STRATEGIC BEHAVIOR

Refers to actions or decisions made by individuals or groups within an

organization in response to external stimuli, such as incentives, directives, or
pressures from the organizational environment.
These external factors can include changes in market conditions, competitive
threats, regulatory requirements, or directives from top management.
Induced strategic behavior typically involves aligning actions with
organizational objectives or responding to external challenges or opportunities.
For example, if a company introduces a new performance-based incentive
scheme, employees may alter their behavior to meet the criteria for earning
rewards.

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AUTONOMOUS STRATEGIC BEHAVIOR

Involves actions or decisions made by individuals or groups within an
organization based on their own I

Autonomous strategic behavior arises from internal motivations, creativity, and

strategic thinking. This type of behavior may stem from individual or collective
efforts to pursue opportunities, innovate, solve problems, or address challenges
without direct external influence.

For instance, employees may autonomously initiate new projects or strategies

based on their insights into market trends or customer needs, even in the
absence of explicit directives from management.

PRODUCT CHAMPION
A product champion is an individual who:
1.Takes on a central role in sensing a marketing opportunity
2.Mobilizes an informal network to assess the opportunities via their:
a. Technical feasibility
b. Financial opportunity

3.Is willing to take on risk (reputation) to bring the project to light

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ENTREPRENEURIAL MOTIVATION
Entrepreneurial motivation can be nurtured and encouraged based on:

1. Availability of rewards
2. Senior managements’ encouragement & support
3. Resource availability including release time to work on
entrepreneurial projects
4. Organizational structure that promotes entrepreneurialism by
providing an administrative mechanism that brings others into the
innovative process when needed
5. Two other influences are:
 Intrinsic motivation
 Work design: availability of challenging projects

PATTERNS OF STRATEGIC BEHAVIOR

Induced vs. Autonomous Strategic Behavior:
Selected Characteristics of Marketing Strategy Formulation Process

Table 12.1 7th ed

Developed by Cool Pictures and MultiMedia Presentations

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DISRUPTIVE INNOVATION
Disruptive innovation occurs when a totally new innovative
product is developed that interrupts the way business and
society does things.

Examples: Train, automobile, telephone, birth control pill,

plastics, and computers.

Usually disruptive products start out small but grow to

overshoot the market.

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THE DISRUPTIVE INNOVATION MODEL

Performance

Range of
Performance
that Customers
Performance that
Can Utilize
Customers Can Utilize
or Absorb

Disruptive
Innovations

Time

Source: Clayton M. Christensen and Michael E. Raynor, The Innovator’s Solution: Creating and
Sustaining Successful Growth (Boston: Harvard Business School Press, 2003), p. 33.

LOW END DISRUPTIVE SITUATION

Low End Disruption: There is a market who
wants the new technology but not as much as is
available.

Low End Strategy Test:

a. There needs to be an adequate number of
customers who want a low version of the
technology (product).
b. The company must be able to create a business
model and discounted product to meet that need
profitably.
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New-Market Disruptions

New-market disruptions are new products

that change the way people do business
but the market historically lacked the
resources to procure it (non-consumption).

New-market strategy test:

a. A large number of customers are unable
to financially procure the product.
b. It is inconvenient for present customers to
use.

NEW PRODUCT DEVELOPMENT PROCESS

To sustain new product success companies:
 Make new product development a top priority
 Directly involve managers and employees to make decisions and speed up action

Because of substantial risks and/or incredible opportunities, companies employ

systematic thinking about new product development.

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CRITICAL SUCCESS FACTORS

Critical success factors that drive a firm’s new product performance are:
1. Quality of the new product development process
2. Resource commitments to new product development
3. New product strategy

MAJOR DRIVERS OF FIRM’S NEW PRODUCT PERFORMANCE

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NEW PRODUCT DEVELOPMENT PROCESS

Benchmarking characteristics include:

• Firm’s emphasis on upfront market and technical
assessments before starting the development process.
• Process featuring complete descriptions of product
concepts, product benefits and positioning to target
markets before starting the development process.
• Process includes tough project go/kill decision points.
• New product process is flexible.

RESOURCE COMMITMENTS
Three main ingredients:

1. Top management commits resources necessary to

meet firm’s objectives for total product effort.
2. R&D budgets are adequate and aligned with
stated new product objectives.
3. Necessary personnel are relieved from other
duties and assigned specifically to the new
product effort.

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Anticipating Competitive Reaction

New products trigger reactions from competitors
when the:
a. New product threatens their market
b. Product is in a rapid growth market
c. Selling firm communicates the new product too
strongly

To quell competitive reaction to some degree,

companies:
1. Put into action a strong “competitor
orientation” before and during implementation
2. Promote to niche markets instead of the whole
market

SOURCES OF NEW PRODUCT IDEAS

Internally from: Externally from:

1.Salespeople 1. Channel Members

2.Employees 2. Competitive Moves
3.R&D 3. Industrial Customers
4.Marketing Research 4. Ultimate Consumers
5.Serendipity

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DETERMINANTS OF SUCCESS
For a successful product development strategy to occur, a company has
to employ proper strategic factors and be proficient at executing them.

The 4 strategic factors are…

Product advantage refers to Marketing synergy

customers’ perceptions of represents the degree of fit
product superiority with respect between project needs and the
to quality, cost-performance firm’s resources and marketing
ratio, or function relative to skills.
competitors’ products.

FOUR STRATEGIC FACTORS

FOR NEW PRODUCT SUCCESS
International orientation:
Technical synergy comes from
New products designed and
the fit between project needs
developed to meet foreign
and the firm’s R&D resources
requirements and targeted at
and competencies.
world or nearest-neighbor
export markets.

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