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Week5 - Analysis - 5 Forces, Segmentation, Targeting & Positioning

Week5 - Analysis - 5 Forces, Segmentation, Targeting & Positioning

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30 views43 pages

Week5 - Analysis - 5 Forces, Segmentation, Targeting & Positioning

Week5 - Analysis - 5 Forces, Segmentation, Targeting & Positioning

Uploaded by

yaraadelosman95
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Welcome back to Strategic Marketing

UN211988

Semester 2, 2017

Office – Rm 208.

www.perth.uhi.ac.uk
Perth College is a registered Scottish charity, number SC021209.
Now .... Industries, markets and sectors

An industry is a group of firms producing products


and services that are essentially the same. For
example, automobile industry and airline industry.
A market is a group of customers for specific
products or services that are essentially the same
(e.g. the market for luxury cars in Germany).
A sector is a broad industry group (or a group of
markets) especially in the public sector (e.g. the
health sector)
Industry Analysis

Michael Porter
Industry Analysis

“Industry structure drives competition and


profitability, not whether an industry is emerging
or mature, high tech or low tech, regulated or
unregulated”
Michael Porter.
Profitability based on ROIC
Examples…

• Market for commercial aircraft


– Fierce rivalry between dominant producers
– Powerful buyers
– Low threat of substitutes
– Low threat of entry
• Photographic film
– Fierce rivalry
– Main threat is substitutes (digital) – see Kodak!
How to reduce/
minimise each?

Porter, 2008
Using the Five-Forces Model
of Competition
Threat of New Entrants
• The threat of entry in an industry depends on the height of entry barriers…and on the reaction entrants can expect from
incumbents.
• There are seven major barriers to entry:
– Supply side economies of scale
– Demand side benefits of scale (network effect)
– Customer switching costs
– Capital requirements
– Incumbency advantage
– Unequal access to distribution channels, eg limited shelf space for FMCG products, internet booking for disruptive budget airlines
– Restrictive government policy
– Expected retaliation
Rivalry Among Existing Competitors
• High rivalry limits the profitability of an industry. The degree to which rivalry drives down an industry’s profits depends on
the intensity of competition and the basis of competition.
• The intensity of rivalry is greatest if:
– Competitors are numerous and/ equal in size
– Industry growth is slow
– Exit barriers are high
– Rivals are aiming for leadership
• Price competition is particularly destructive to profitability. It is most likely to happen if:
– Products and services of rivals are almost identical
– Fixed cost are high and marginal costs are low
– The product is perishable
Bargaining Power of Suppliers
• A supplier or supplier group is powerful if:
– It is more concentrated than the industry it sells to, eg Microsoft selling to the fragmented PC
assembly industry.
– The supplier does not depend heavily on the industry for its revenues
– Customers face switching costs
– Suppliers offer differentiated products (eg Pharmaceutical companies power over hospitals)
– There is no substitute for what the supplier group provides
– The supplier can credibly threaten to integrate forward.
Bargaining Power of Buyers

• Buyers are powerful if:


– There are few buyers in the market
– The industry’s products are undifferentiated
– Buyers face few switching costs
Threat of Substitutes

• “A substitute performs the same or a similar function as an


industry’s product by a different means. Videoconferencing is a
substitute for travel…”
• The threat of a substitute is high if:
– It offers an attractive price/performance trade-off to the industry’s product
– Buyer’s cost of switching is low
Not all forces affect an industry equally…
Implications of five forces analysis

• Identifies the attractiveness of industries – which


industries/markets to enter or leave.
• Identifies strategies to influence the impact of the forces,
for example, building barriers to entry by becoming more
vertically integrated.
• The forces may have a different impact on different
organisations e.g. large firms can deal with barriers to entry
more easily than small firms.
Issues in five forces analysis

• Apply at the most appropriate level - not necessarily the


whole industry. E.g. the European low cost airline industry
rather than airlines globally.
• Note the convergence of industries - particularly in the high
tech sectors (e.g. digital industries - mobile
phones/cameras/mp3 players).
• Note the importance of complementary products and
services (e.g. Microsoft windows and McAfee computer
security systems are complements). This can almost be
considered as a sixth force.
• Now - Develop a 5 Forces for UHI
Illustrative Strategic Questions:
Segmentation, Targeting & Positioning
• What is the market? What is our market?
• How is this market developing? What are significant
trends?
• Who are potential customers of our offerings? Who are the
most important potential customers
of our offerings?
• Who does buy/who does not buy and why/why not? Why
are our offerings being used?
• Who decides, who influences, who purchases, who uses?
More questions…
• How do these potential customers differ in their purchase and usage habits
(benefits sought, usage level, preferred channel, price sensitivity, timing etc.)?
• How can we structure/group the market into meaningful segments with similar
needs?
• What are the key motivations/objectives/buying criteria that are most valued by
these segments to purchase our offerings? What type of experience are these
different customers after?
And more…
• What is the attractiveness of these segments (size, purchase power/ price
levels, etc.)
• How will these segments evolve over the next years (attractiveness, latent /
evolving needs etc.)
• What are market entry barriers and market success factors?
• How can we leverage our internal skills, processes, positioning etc. into better
serving these segments?
Segmenting, Targeting and Positioning
Some definitions…
What is Segmentation…?

Partition the market into to


The unsegmented market The segmented market
homogeneous groups:

 specific marketing activities


per targeted segment y
 segment needs
x yto be attractive
enough to justify extra costs x
 match between segment desires
and firm resources/capabilities

x= buyer 1 Target Target


y= buyer 2 Segment 2 Segment 1
Segmentation: factors affecting feasibility
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dddddddddddddddddddddddddddddddddddddddddddddddddddddddddddd
dddddddddddddddddddddddddddddddddddddddddddddddddddddddddd
Different Approaches to Segmentation

• Geographic and Geodemographic


– Identification of retail sites
– Selection of sales territories
– Allocation of marketing resources
– Media selection
– Which products and services to offer via retail outlets: W.H Smith newsagents
Demographic Segmentation

• Age, sex, income , education, stage in the family lifecycle


• A, B, C SECs
Behavioural Segmentation

• Attitudes, knowledge, benefits sought, willingness to innovate,


loyalty, usage rate
• Needs measure of consumers’ value system
• ‘Benefit segmentation’

Usage segmentation: Camera Benefit segmentation: Toothpaste

 Heavy users vs. light users  economy (low price)


 Professional vs. amateur user  medicinal (decay prevention)
 cosmetic (bright teeth)
 taste (good tasting)
Usage Segmentation

Professional vs. Amateur Users


Heavy vs. Light Users
Benefit Segmentation
Thus, we need to understand customer
desired value and values!
Psychographic and Lifestyle

Eg ‘The Progressives’
Positioning Maps
Positioning – Value Proposition
Strategic Approaches to Segmentation
Targeting
• In deciding on which segments to target, the following factors have to be considered:
• Size and growth potential
• Structural attractiveness (Five Forces analysis)
• The organisation’s objectives and resources
• Having identified these factors the main patterns of market coverage are:
– Single segment concentration
– Product specialisation: eg Next sells clothes to a range of markets
– Market specialisation: eg Citibank personal banking meeting all the needs of customers with over $250k in liquid assets
– Full market coverage
Which segments to target: the Multifactor
Matrix Approach
• How attractive is the segment
• Does the firm have the business strengths to win in the segment?
Measuring Market Sector Attractiveness and
Business Strengths
• What factors make the segment attractive to the firm
• The resources, skills, capabilities any firm would need to be successful
against those criteria:
Product Positioning

Battle for the Consumer’s


Mind & Heart

“Companies should find some distinctive


mental and emotional territory which they can own
and defend”
Simple Perceptual Map Showing Car
Industry Positioning
Example of a positioning statement

To (target segment and need) our (brand) is a


(concept) that (point-of-difference).

“To busy mobile professionals who need to


always be in the loop, Blackberry is a wireless
connectivity solution that allows you to stay
connected to people and resources while on
the go more easily and reliably than the
competing technologies.”
Finally…
The main aims of strategic segmentation is to identify unexploited opportunities in the following groups:
•Customers with articulated needs – and whose needs are not currently being met by existing competitors
•Customers with unarticulated needs

1.Segmentation:
Part of managing strategic marketing
2.Targeting
Key decision making
3.Positioning
e.g. Fry’s Turkish Delight. Patek Phillipe.
Fry's

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