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1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Page 1: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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2007 Edition

Vitale, Giglierano and Pförtsch

Chapter 7Segmenting, Targeting, and Positioning

Page 2: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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3 Basic Concepts in B2B Marketing

Segmenting Targeting Positioning

Page 3: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Basic Ideas of Segmentation

Marketers seek to create market segments that have the characteristics of

Measureability

Accessibility

Substantiality

Actionability

Page 4: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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MeasureabilityCan we understand the size and needs of the market segment?

AccessibilityCan we communicate with the segment so that serving the segment is possible?

SubstantialityDoes the segment desire that values that an offering presents?

ActionabilityCan we create a competitive advantage with respect to the needs of the segment?

Page 5: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Common Bases for

Segmentation

By product offered

By industry in which the customer

participates

By size of the customer’s

company

By buying behavior

By technologyused by thecustomer

By size of account

By geographicregion

Page 6: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Value-Based Segmentation

Value: the sum of the benefits minus the sum of the costs

Companies should try to choose and address segments that are homogenous in the kinds of value sought.

HomogenousSegments

HeterogenousSegments

Page 7: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Analytic Approach to Segmentation

Analytic approaches need two sets of data:1) Information about segment size and growth

• Standard Industrial Classification (SIC) and North American Industrial Classification System (NAICS) codes are useful.

2) Information about each targeted segments needs and buying behavior.

Page 8: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Hypothetical Segmentation Data

• From secondary data (US Census data)– Number of business with 50-500 employees 375,000

• From quick survey of consultants– Seg 1: Major turnaround 10%– Seg 2: Stopping deterioration 20%– Seg 3: Competitive improvement 30%– Seg 4: Specific area improvement1 50%

• From Delphi estimate of small business consultants:– Seg 1: Change in major turnaround by 2002 +100%– Seg 2: Change in stopping deterioration by 2002 +100%– Seg 3: Change in competitive improvement by 2002 -50%– Seg 4: Change in specific area improvement by 2002 +150%

1 – can overlap with other categories

Page 9: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Hypothetical Sizes of Market SegmentsSegment # of Small

Businesses in 2000

# of Small Businesses

in 2002

Change, 2000 to 2002

Segment 1 – Major turnaround

37,500 75,000 100%

Segment 2 - Stopping deterioration

75,000 150,000 100%

Segment 3 - Competitive improvement

112,500 56,250 (50%)

Segment 4 – Specific area improvement

112,500 281,250 150%

•This shows how an analytic approach can be used to estimate segment size and growth.•To complete the analysis, data is also needed on the needs and buying behavior for each segment. Go to Exhibit 7-6

Page 10: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Segmentation by Discovery

• Sometimes, a business starts serving only 1-2 large customers.

• Over time, additional customers who seek something similar to the original offering are recruited/attracted. In this way, a new segment is “discovered.”

• Field marketing personnel must be coached to recognize such discovery opportunities.

• Proprietary information of different customers must be respected.

Page 11: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Factors in Assessing Segment Attractiveness

•Size of segment•Growth rate of segment•Intensity of unmet needs•Reachability of segment through communication channels•Readiness of segment to reach and adopt a solution•Likelihood of competitive intensity•Sufficiency of channel reach•Likely value contribution by channel(s)•Match between segment needs and supplier’s strengths•Differentiability of supplier’s offering•Opportunity to achieve strategic goal by addressing segment•Opportunity to achieve learning goal by addressing segments

Page 12: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Attractiveness of SegmentsMarket

Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

Page 13: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Market AttractivenessMarket

Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

•Large and fast growing segments are more attractive than smaller and slow-growing segments•This necessitates accurately predicting future growth.•Other issues include

•Adaptability of market segments,•Existing relationships with the buying center members, and•Available customer’s budget

Page 14: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Competitive AttractivenessMarket

Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

•What is the likely existence or emergence of competition in the market segment?•Are there barriers to entry facing competitors?•Does being first to market provide an advantage?

Page 15: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Channel AttractivenessMarket

Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

•It is preferable to target customers already served by well-established marketing channels, or if an existing channel can be adapted, it may serve the segment.•When there is no suitable existing channel, a market view of competition may be necessary.

•How is the existing need being met?•Will customers switch?

Page 16: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Internal AttractivenessMarket

Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

•A segment is more attractive when the segment’s needs can be met by the firm’s core competencies.•This is identified through environmental analysis.

Page 17: 1 2007 Edition Vitale, Giglierano and Pförtsch Chapter 7 Segmenting, Targeting, and Positioning

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Segment AttractivenessSegment 1

Major Turnaround

Segment 2: Stopping

Deterioration

Segment 3: Competitive

Improvement

Segment 4: Specific Area Improvement

Potential Size in 2000 (in millions)

2

$187.5

3

$375.0

4

$562.5

4

$562.5

Growth, % by 2002 4

+100%

4

+100%

1

-50%

5

+150%

Need strength 5 4 3.5 3.5

Competitive strength 3 3 4 3

Channel reach 5 5 5 5

Communications reach

4 4 4 4

Capability fit 2 5 5 2

Price sensitivity 2 3 4 3

Overall attractiveness (sum of attribute scores)

27 31 30.5 29.5

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Attractiveness – Other Considerations

Market Attractiveness

Competitive Attractiveness

Channel Attractiveness

Internal Attractiveness

Attractiveness – OtherConsiderations

•Other factors that might cause a segment to rated higher or lower include:

•Public policy (excessive government regulation can cause a segment to be downgraded)•Organizational goals (market share goals may make firms more aggressive in targeting)