WPS Management Workshop - Business Segmentation

Strategically Branding A Strategically Branding A DestinationDestination

William D. NealWilliam D. Neal

Senior Executive OfficerSenior Executive Officer

SDR, Inc.SDR, Inc.

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What Values Come to Mind?

Coca ColaCoca Cola

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Hewlett PackardHewlett Packard

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HondaHonda

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DisneyDisney

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Las VegasLas Vegas

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Branding is a Strategy

• Great brands are built strategically

• Great Brands are a central element of strategic business planning.

• Great Brands dominate the market planning process.

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StrategyStrategy - integrated actions in the pursuit of competitive advantage

George Day

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Strategic Market Planning

A planning process to develop or improve sustainable competitive advantage.

“If it moves, we sponsor it,

if it doesn’t move, we paint it red.”

Roberto C. Goizueta, Coca Cola

Can we adopt strategic business planning models to the Travel & Tourism Industry?

Yes !But we must change our thinking a bit

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Think in terms of BUSINESS• The location can be thought of as the ENTERPRISE.

– ORLANDOORLANDO

• Individual destinations can be thought of as STRATEGIC BUSINESS UNITS dominated by Brands.– Disney WorldDisney World– Universal StudiosUniversal Studios– Sea WorldSea World

• Specific activities can be thought of as CUSTOMER REQUIREMENTS.– Rides & AttractionsRides & Attractions - History Education- History Education– Culture/HeritageCulture/Heritage - Nature- Nature– Night LifeNight Life - Educational Programs- Educational Programs

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Think in terms of BRANDS• The destination area can be thought as an

AUTHORITY BRANDAUTHORITY BRAND.– ORLANDOORLANDO

• Individual destinations can be thought of as STRATEGIC BRANDSSTRATEGIC BRANDS.– Disney WorldDisney World

– Universal StudiosUniversal Studios

– Sea WorldSea World

• Specific activities can be thought of as INDIVIDUAL BRANDS to meet customer needs.– Indiana Jones Theme ParkIndiana Jones Theme Park - Theme Hotels- Theme Hotels

– Old Town OrlandoOld Town Orlando - Nature Island- Nature Island

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The Brand Hierarchy

Authority Brand

StrategicBrand

StrategicBrand

StrategicBrand

Sub-Brand

Sub-Brand

Sub-Brand

Orlando

Indiv. Rides Attractions Theme Hotels

Disney UniversalSea World

San AntonioSan Antonio

What Master Brands come to mind for this Authority Brand?

The RiverwalkThe AlamoThe Five MissionsTexas Museum of HistoryThe Spurs

AtlantaAtlanta


The Braves & Turner FieldStone Mountain ParkBuckheadEmory Medical CenterLake Lanier

Ocracoke Island?Ocracoke Island?


Where is Ocracoke?

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CONSUMERCONSUMER

Marketing Activities

Marketing Mix

Other Co. Activities

Finance, Production, Legal

External Environment

Economic, Political, Technological, Social, Demographic

The Marketing ConceptThe Marketing Concept

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The Marketing ConceptThe Marketing Concept

• The purpose of business is satisfied customers– Drucker, Levitt, McKitterick

• The purpose of business is to deliver value– Porter, Reichheld, Berry

All Products &Services in the Category

Consideration SetBrand Hierarchy* Brand V* Brand X* Brand Z

Brand Value ConceptBrand Value Concept

The rational buyerpurchases the brand withthe highest value to them

Satisfaction simply keeps you in the Consideration Set

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The Marketing ConceptThe Marketing ConceptREALITY:

• Marketing Concept must also address the competition

• The purpose of business is to deliver higher relative value.

• To survive and grow, you must provide: SUSTAINABLE COMPETITIVE ADVANTAGE

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Goal of Marketing Strategy

Develop Sustainable Develop Sustainable Competitive AdvantageCompetitive Advantage

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Strategic Market Planning

A planning process to develop or improve sustainable competitive advantage. (Neal, “Introduction to Marketing

Strategy”)

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The Kotler Model*

MarketingOpportunity

Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development

Product & Market Levels: The Market PlanningProcess

CompanyMission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Corporate & Divisional Levels: Strategic Planning Process

* Philip KotlerBusiness MagazineMay-June 1980, pp3

Modified by W.D. Neal30 April, 1986

Execution

Environment

Information

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Customers

Market SegmentationProduct Positioning

Prod. OptimizationMarket Forecasting

Customer SatisfactionBrand Value

The Major Elements of the Strategic Planning Process at

the Enterprise Level

• Mission• Goals & Objectives• Growth Strategy• Business Portfolio Plan

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Mission

• Short statement of the business you are in

• Used to focus and limit your purview

• Often the hardest step in the process

• Often accompanied with a VISION STATEMENT - what do I want to be in the future.

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Goals & Objectives

• Goals - longer term, broader outcomes you are seeking (e.g. lead the industry in sales and service)

• Objectives - shorter term, totally measurable outcomes (e.g. sustain a 10% increase in annual profitability for each of the next three years)

• Each goal should have multiple, time-phased objectives crafted so that their accomplishment will fulfill the goal.

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Growth Strategy• To grow by how much over what time period.• How will we measure growth - sales, profits,

share, operating ratios, etc.• How will we grow?

– Higher Demand– New products – Market expansion– New market penetration– Production efficiency– Acquisition– etc.

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Business Portfolio Plan

• What elements of my business will I put under the same management group?– By brand family – By product line– By geographic/country location– By channel– By buyer benefits delivered– etc.

Developing The Strategic Marketing Plan

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Step 1 - Assessment

SWOT Analysis

– Strengths

– Weaknesses

– Opportunities

– Threats

Areas to AddressInternal Opns

Competitors

Markets

Marketing

Environment

Core knowledge

Experience

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The Kotler Strategic Planning Model

The Company TheEnvironment


Product OptimizationMarket Forecasting


Product & Market Levels: The Marketing Process

Company

Mission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Information

Execution


Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development

Philip KotlerBusiness Magazine

May-June, 1980, pg..3Customer Feedback

Customers

Brand Value

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Step 2 - Marketing Opportunity Analysis

• Segment the market - What bases?– Needs/preferences– Values/benefits sought– Occasions– Demographics

• Align your strengths against competition’s weaknesses - BY SEGMENT– Share of market, Share of preference,– Channel control, Price advantage, Brand strength, – Price/value perception, Production capability, etc

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Market Segmentation

Firms that properly segment their market and focus their resources on deep penetration of targeted segments almost always exhibit higher profitability.

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Why is Market Segmentation usually successful?

• Focuses the resources of the firm on a specific target of similar customers.

• Limits competitive pressure.

• Allows the firm to develop a deep marketing-mix experience with the segment.

• Provides a platform for expansion into contiguous segments.

Demographics(Life Stage)

Occasions

The Multi-Dimensional Segmentation ModelThe Multi-Dimensional Segmentation Model

Act

ivit

ies

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Company

Mission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Information

Execution


Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development



Customers

Brand Value

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Step 3 - Target Market Selection

• Evaluate segments in terms of your perceived strengths and weaknesses vs competitions’ -develop perceptual maps for segment groups

• First, select segments you currently dominate and determine how to defend and improve your position

• Next, select segments that you could dominate and prioritize by cost of domination.

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Step 3 - Target Market Selection (cont.)

• Finally, find any remaining segments that represent high growth potential and look at ways you could successfully enter those segments.– New product introduction– New brand platform– Power promotion

• Order segments by financial attractiveness and prioritize investments

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Company

Mission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Information

Execution


Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development



Customers

Brand Value

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Step 4 - Marketing Mix Strategy

FOR EACH TARGETED MARKETFOR EACH TARGETED MARKET…• Determine how you will optimize VALUE for

each target market, now and in the future• Plan the product/service attributes you will

emphasize• Plan your advertising/promotional support

program• Plan your channel/delivery strategy - avoid

channel conflict• Plan your pricing strategy

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Step 4 - Marketing Mix Strategy (cont.)FOR EACH TARGETED MARKETFOR EACH TARGETED MARKET…

• Develop contingency plans for likely competitor counter-attacks

• For each segment, determine how you will enhance your brand equity

• Use market simulation (preference or choice models) to test likely market response to your initiatives and to test competitive responses

• Check for incompatible brand and product positions across targeted segments

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Company

Mission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Information

Execution


Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development



Customers

Brand Value

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Step 5 - Marketing Systems

• Forecast the growth in each targeted segment

• Develop selling and delivery systems that will support the current market and can handle the forecasted growth.– Market information systems– Customer service operations– Communications programs

• Develop a customer feedback system that measures plan vs. actual

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Company

Mission

Objectivesand

Goals

GrowthStrategy

BusinessPortfolio

Plan

Macro-environment

Publics

Competitors

Marketing Channels

Markets

Target Markets

Information

Execution


Analysis

TargetMarket

Selection

MarketingMix

Strategy

MarketingSystems

Development



Customers

Brand Value

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Strategic Planning• Strategic market planning is non-linear and

recursive (and sometimes chaotic)• The interface between the overall business

strategy and the strategic marketing plan is critical - they must be fully integrated

• Ultimately, the strategic business plan dictates the amount of investment you can afford in your marketing plan

• Develop a plan to measure costs, effectiveness, and progress to objectives - ROMI

Winning StrategyWinning Strategy - - Maximize Maximize valuevalue which maximizes which maximizes

loyaltyloyalty for each target market for each target market• The KEY to customer LOYALTY and growth

is to:– Get into the consideration set– Then, consistently deliver the BEST VALUE to

the targeted customers.

• VALUE is the KEY DRIVER of choice, thus LOYALTY!

• Brand Equity should be a major element of the VALUE PROPOSITION.

Why is Brand Equity Important?

• Prevents commoditization of the category.• Communicates added value beyond the tangible

product performance characteristics, improving selling price and margins.

• Provides a strong defense against low price generic brands.

• Provides a platform for new product introductions.• Gives more channel control to the

manufacturer/producer. • Improves stockholder value and stock price.

Competing Theories of Brand Equity

Financial Orientation– Interbrand - Premium over category avg.– Accepted Accounting Procedures– Farquar - New Accounting Procedure

Market Orientation– Total Research - Equitrend– Landor Associates– Aaker– Young & Rubican– CDB Research– Vanderbilt/SDR (Srinivasan, Russell, Kamakura)

MARKETPLACE APPROACH

TOBRAND EQUITY

Competing Market Theories of Brand Equity

• Aaker-Building Strong Brands. Views brand equity as the total value of a brand, including price premium, satisfaction, product attributes, image attributes, public opinion, and so forth.

• Vanderbilt Model - (MSI Series on Brand Equity.) (Srinivasan, Russell, Kamakura) Views brand equity as just the imagery that surrounds the brand name by buyers in the product category. Brand equity is separate from price and product performance attributes and may be measured as a price differential.

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Aaker’s 10 Measures

• Loyalty Measures– Price Premium– Satisfaction/Loyalty

• Perceived Quality/Leadership Measures– Perceived Quality– Leadership/Popularity

• Associations/Differentiation Measures– Perceived value– Brand Personality– Organizational Associations

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Aaker’s 10 Measures (cont.)

• Awareness Measures– Brand Awareness

• Market Behavior Measures– Market Share– Market Price & Distribution Coverage

“The price premium may be the best single measure of brand equity available, because it directly captures the loyalty of customers in a most relevant way.” Aaker, pg 321.

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Aaker’s 10 Measures (cont.)

• Aaker model uses very disparate measures for

each of the 10 criteria.

• Uses judgement to weight measures, depending

on the product category, in order to construct a

single summary measure.

• Does not work cross-culturally because of

measurement and scaling issues.

• Gives no examples

• Ultimately, it is totally judgmental.

BRAND VALUEVanderbilt/SDR Model

(Combines market orientation and financial orientation)

The Brand Value Model•Idea developed from literature of

Srinivasan, Russell & Kamakura

• Very similar model described by Srinivasan & Park (JMR, May 94) (used expectancy-value measurement model)

• SDR’s approach uses tradeoff exercises combined with other measurements.

Brand Value Concept1. Buyers who are considering a purchase, scan their

product/service options and develop a consideration set.

2. Within the consideration set, they develop a hierarchy of brands/products based on their assessment of VALUE.

3. Typically, they choose the brand or product at the top of their value hierarchy, if available.

THIS MAY BE A CONSCIENCE COGNITIVE PROCESS, OR A SUB-CONSCIENCE PROCESS WITH SOME EMOTIONAL ELEMENTS

The

All Products/servicesin the Category

Consideration SetBrand Hierarchy* Brand V* Brand X* Brand Z

Brand Value ConceptBrand Value Concept

The rational buyerpurchases the brand withthe highest value

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How Brands Get Into the Consideration Set

• Awareness

• Satisfaction in previous experience, or reputation for

high satisfaction of customers

• Trusted

• Compatible image with purchaser

• Perceived acceptable price range

• Not socially irresponsible

• Acceptable country of origin

Brand Value Concept

Elements of Brand Value:Elements of Brand Value:

- A BUNDLE of tangible attributes delivered by the product/service or its channel.

- A BUNDLE of intangible attributes delivered by the name of the brand or producer (brand image or brand equity.)

- The price of those combined bundles.

Brand Value Concept

Customers determine brand value

Varies by customer and customer segment

Varies by product/service category

Any one Customer may have a different value set for different product categories

ValueValue

Brand Value ModelBrand Value Model

What Drives Value ?What Drives Value ?

ValueValue

Price


PricePrice is one element is one elementPrice includes:Price includes:

- Initial Costs- Initial Costs- Operating Costs- Operating Costs

Initial PriceOperating Cost

ValueValue

Price Product/ServiceDeliverables

Attribute 1Attribute 2Attribute 3etc..

Brand Value ModelBrand Value ModelThe bundle of tangible product/service attributesis another.

Product Product PerformancePerformance

Service/ChannelService/ChannelPerformancePerformance

ValueValue


Co./Brand Equity

Image Driver 1Image Driver 2Image Driver 3etc..



Brand equityBrand equityis the thirdis the thirdelement.element.

Attribute 1Attribute 2

ValueValue


Co./Brand Equity




WPrice

Wi

WiAttributesWbrand

WiWiWi Wi

Wi

Wi

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Each elementEach element of ofthe brand valuethe brand valuemodel has a model has a weightweight

Wi

WiAttribute 1Attribute 2etc..

ValueValue


Co./Brand Equity




WiWiWiWi Wi

Wi

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Each buyer hasEach buyer hasa different a different weightweightstructurestructure


Wi

WPrice WiAttributesWbrand

ValueValue


Co./Brand Equity




WiWiWiWi Wi

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The buyer’s weightThe buyer’s weightstructure is theirstructure is theirValue EquationValue Equation

Wi


WPrice WiAttributesWbrand

Brand Value Model

• EachEach buyer has a buyer has a uniqueunique Value EquationValue Equation

• The Value Equation provides the buyer The Value Equation provides the buyer with a with a preference structurepreference structure for making a for making a CHOICECHOICE among a competing set of among a competing set of products or services in a category.products or services in a category.

• Rational buyers choose the best Rational buyers choose the best VALUEVALUE..

• Thus Thus VALUEVALUE drives drives CHOICECHOICE..

ValueValue


Co./Brand Equity

ChoiceChoice




WPrice

Wi

WiAttributesWbrand

WiWiWi Wi

Wi

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Brand Value ManagementBrand Value Management

BRAND VALUEBRAND VALUE

• Varies by product/service category.Varies by product/service category.

• Price and performance features can often be met Price and performance features can often be met by competitors.by competitors.

• Brand equity is more difficult to change - long Brand equity is more difficult to change - long term strategy - Both offensive and defensive.term strategy - Both offensive and defensive.

• When there is weak brand equity and product/ When there is weak brand equity and product/ channel parity in a category, price is the only channel parity in a category, price is the only remaining marketing variable.remaining marketing variable.

Brand Equity CharacteristicsBrand Equity Characteristics

BRAND EQUITYBRAND EQUITY Intangible, varies by categoryIntangible, varies by category Not easily duplicated, thus provides long-Not easily duplicated, thus provides long-

term defense against competitionterm defense against competition Underlying drivers are perceptual:Underlying drivers are perceptual:

– Image imparted to the purchaserImage imparted to the purchaser– TrustTrust– Longevity in the marketplaceLongevity in the marketplace– Reputation for qualityReputation for quality– Community involvementCommunity involvement

Built and improved by effective advertisingBuilt and improved by effective advertising

Brand Value/Equity MeasurementBrand Value/Equity Measurement

ASSUMPTIONSASSUMPTIONS

• Buyers optimize value within a product or service category.

• Buyers therefore assign utilities (weights) to price, performance attributes, and brand equity.

• Buyers trade off performance attributes and brand equity against price in order to optimize value.

• The utilities (weights) of price, performance attributes and brand equity is summative and equal to total brand value.

Brand Value/Equity Brand Value/Equity MeasurementMeasurement• First, we use conjoint models to estimate

utilities.

• Respondent goes through two tradeoff tasks

TASK 1TASK 1 - Brand-Price tradeoff - Brand-Price tradeoff

TASK 2TASK 2 - Brand-Features-Price tradeoff - Brand-Features-Price tradeoff

• Merge results of both tasks at the respondent subgroup level and re-scale to be comparable.

• Purpose is to get accurate estimate of price utility

Measurement ModelMeasurement Model

Total Value Total Value

(U(Utt))

Price (Upr) Product (Upt)

Attribute 1

(u1)

Attribute 2

(u2)

Attribute J

(uj)Brand

(Ub)…

First stage conjointFirst stage conjoint

Second stage conjointSecond stage conjoint

PriceX

Task 3 - Choice Task• Respondent then goes through a CHOICE

TASK that is based on their conjoint results.• Respondent is asked if they would switch

to, or purchase next, their highest rated conjoint profile.

• IF YES, we ask about another (lower) profile, and so on until they would not purchase or switch.

• PURPOSE: measure barriers to switching and confirm conjoint results

Task 4 - Brand Image Ratings

• Each brand in the competitive set is also rated (0-10 scale) on its imagery, for example:– A brand I can trust

– A brand that I want seen in my home

– A company that will fix any problems I may have with their product

– etc.

• Ratings are then (ridge) regressed against derived brand equity from the conjoint to get the relative weight of each image driver.

Task 4 - Brand Image Ratings

• The beta coefficients from the ridge regression (or similar models) reveal the key drivers that are most associated with each brand’s utility (derived brand equity)

• Thus, you can reveal the key drivers of brand equity, improve your imagery on those attributes and improve brand equity

Brand Equity DRIVERS – Service Co.Brand Equity DRIVERS – Service Co.

Honest in its dealings with customers Concerned about my family’s needs Progressive and innovative Respects me as a customer Is well managed Efficient in coordinating the service activities

of different departments Keeps me informed of energy matters that are

important to my family’s health Easy to do business with Contributes to the community

Average Importance of the Elements of Brand Value

Category Price Product/ChannelAttributes

Brand/Co.Equity

Carbonated Soft Drinks 22% 40% 38%

A Class of Automobiles 24% 68% 8%

Consumer Paper Products 48% 46% 6%

Sports Drinks 8% 34% 58%

Canned Pet Food 50% 43% 7%

Electric Utility 15% 80% 5%

Industrial Electronic Equip 16% 72% 12%

Brand Valuation Brand Valuation RESULTSRESULTS• With this type of model, you can build a

market response simulator to determine how each marketing mix variable effects share of choice.

• Changes in BRAND EQUITY can be tracked over time.

• Changes are relative to other products/ brands in the category.

ValueValue


Co./Brand Equity

ChoiceChoice




WPrice

Wi

WiAttributesWbrand

WiWiWi Wi

Wi

Wi

Wi

Wi


Winning Strategy - Maximize value which maximizes loyalty

for each target market

• The KEY to customer LOYALTY and growth is to consistently deliver the BEST VALUE to the customer.

• VALUE is the KEY DRIVER of choice, thus LOYALTY!

• Brand Equity can be a major element of the VALUE PROPOSITION.

Market Segmentation Based on Market Segmentation Based on the Value Modelthe Value Model

• Derive the value equation for each respondent in the survey.

• Each buyer’s value equation can be used as the basis for segmenting the market.

• Form groups of respondents who have similar value structures (e.g. price sensitives, service sensitive groups, product performance sensitive groups, etc.)


• Each buyer has a unique value equation.

• We use modified conjoint/choice exercises to determine that value equation for each respondent.

• From the derived utilities and choice information, we can determine each respondent’s switching behavior under different competitive scenarios.

From the Brand Value Model

• We can determined who switched.

• We can determine why they switched.

• We can describe the switchers.

• We can describe the non-switchers.

FOR EACH COMPETITIVE SCENARIOFOR EACH COMPETITIVE SCENARIO

This led us to a discovery!This led us to a discovery!There are different kinds of loyalty!• Some people are loyal because they are

committed to a brand or company.• Some are loyal because a particular brand

offers some unique benefits or performance characteristics.

• Some are loyal because they won’t spend the time or effort to make an evaluation.

• Some are loyal because they have little choice.• And some are just disloyal, buying on price or

convenience alone.

Some Parting ThoughtsSome Parting Thoughts

• A label is not a Brand!

• Advertising and Promotion costs to support a brand is an investment, not an expense.

• The starting point, and the KEY to building Brand Equity, is to define what you want your brand to stand for - the implied contract you have with the consumer.

• Then, support that brand image in every way - in all selling materials, with distributors & retailers, in advertising, promotion, and PR.


• You can stake out a brand promise in many ways:– The highest quality in the category– Good & Economical– Available everywhere - systems, parts and repair– The best designs in the business– Extreme versatility/diversity

• Make sure your performance (and your channels’ performance) backs up your promise - walk the talk!


• Strong brands mitigate channel dominance and product commoditization.

• Strong brands pull product through the channel.

• Strong brands improve profit margins.

• Strong brands build stockholder equity.

• If you do not build strong brands in your category, someone will do it to you!

Questions and CommentsQuestions and Comments

[email protected]@sdrnet.com

Documents

WPS Management Workshop - Business Segmentation