Week 4 – Segmentation, Targeting, Differentiation, and Positioning

Reflections from the readings

Programmed Personas evaluating a Tablet?

Obsessing on the consumer, what better way than to offer a product specifically suited for a particular consumer’s needs? Or rather, a large group of consumers’ needs… after all, a company will want to sell as many as possible! Segmentation is the method used to hone in on a group of consumers’ needs. Here is where the obsession begins – companies and consulting firms desperately want to know what makes consumers tick. Determining the differentiation of need, likes, and behaviors entails vast data collection about consumers’ preferences vs. characteristics. For example, age is a segment. What do we know about age? We know that the younger and older generations behave differently on many levels, have ingrained life experiences, habits and societal norms about behaviors, and therefore choose products that fit an expected pattern. Obsessing on the consumer means that a firm understands that marketing and selling high tech computer products at an event attended by mostly elderly consumers is not going to yield as much in the way of sales of those items, since the elderly do not generally crave the latest gadgets. In fact, some companies are creating personas, fictional representations of customers in particular segments and how they behave, live and buy. I wonder if these are virtual programs in a simulation? I would categorize this as just a little obsessive…  

I was very interested to learn from the readings about the process firms use to determine which segments to target. Bottom line, firms want to target segments that are most profitable for them.  The firm must evaluate a particular segment as to feasibility and fit of the firm’s resources, mission, technologies and/or skills to deliver to that segment.  The firm will prefer to target those segments that are larger, or more profitable, and/or faster growing.  It must consider how well it will compete in the segment – how many other products/firms in the segment, barriers to entry, ability to differentiate will be critical factors. External environment will factor into the segment selection, such as government regulations, economic conditions of the segment and public perception of entering the segment. There are many methods for determining criteria and ranking the various segments under consideration, such as competitor capability matrices.

It gets more complicated. Once the segment(s) are selected, the firm must decide if they are going to concentrate efforts at a particular chosen segment, perform mass marketing at the segments (undifferentiated), or use differentiated approaches to cater specifically to multiple segments. In The Fashion Channel (TFC) case, this is exactly the decision faced by the firm – historically they used an undifferentiated broad approach for all segments in their market. As competition started peeling away customers by focusing more on specific segments, TFC must reevaluate whether they want to differentiate their marketing segment strategy.



Probably not the best way to woo the female segment, eh?



Positioning then, is the strategy used to differentiate the product to appeal to that targeted segment. Much study is done to determine what customers value most and where this need is either underserved, or where more value over competition can be exploited.  



Next week I'll focus on a few segmentation examples of companies and their products.

Week 3 - Using Market Research to Gain Consumer Insights

Reflections from the assigned videos


First of all, let me say that having worked in my company as an engineer in the technical realm for the last 18 years, I really have very little visibility to how the marketing department collects and analyzes data about customers' needs. We visit customers and collect their voices and needs, but as the video featuring Malcolm Gladwell points out, often the customer does not verbalize that which is desired. I know that we look at the size of the markets, we segment markets, we look at the shares of the various markets by competitors, etc. We utilize data from consulting and market research firms, we consider external economic factors (such as the price of oil and commodities), and predict trends for demand. I have seen many of the resulting charts and data packages from these marketing activities, but I must admit I have always wondered how comprehensive this information can be. The factors one should consider in the marketing plan for this line of business are seemingly infinite, with many interdependencies and dynamic variables.




Making Data Meaningful - A Scholastic Example



Thus, how does one process all of this data into something meaningful and useful? It reminds me of our foray into considering the role we could play in telematics and what services would be valuable for a customer. Considering all of the data one could collect about the operation of our engine, it would become very easy to get swamped with data overload, and miss something important. In the video featuring Dr. Hans Rosling, I was thoroughly impressed with the way the data was presented. I don't believe I have seen many examples of this approach within the company, despite the seemingly endless powerpoint presentations I have witnessed. How one presents the data makes a huge difference. The fact that the GapMinder software package can also animate the data is extremely useful in understanding trends over time. I also liked the last part where the pictorial to describe the future vision of data sharing resembled a growing garden, as yet another psychological positive emphasis to promote the concept.



The Malcolm Gladwell video got me thinking about how to determine what customers want. I believe that our company has thrived primarily because we have tailored the product to suit multiple needs. Unfortunately, this has resulted in proliferation over time which can also be expensive to maintain. I have been involved in strategy discussions where it has been suggested that we revert product lines into "Vanilla or Chocolate" type choices. However, as Malcolm points out in the description of Howard Moskowitz's approach, people are going to like other flavors and variations in a particular product. I think the key is to find the right balance of product offerings that is going to serve the largest portion of the customer population as possible. If you only offer Chocolate or Vanilla, you may find that you lose big when your competitor offers Strawberry.

As for how I would go about collecting and analyzing market data for the tablet project, I believe one good place to start in understanding customer needs and desires is to look at product reviews on tablets that are already in the market. I believe much can be gleaned from both the positive and negative comments about features that are liked/disliked, what is most important to customers (e.g. ease of use, ability to utilize other media, quality, etc.). Also, scanning articles about the product from news sources can provide useful information. Here is one that was published very recently in the New York Times, that explores whether consumers really like having multiple media avenues for their e-readers.

Finding Your Book Interrupted ... By the Tablet You Read It On
By JULIE BOSMAN and MATT RICHTEL

Published: March 4, 2012

http://www.nytimes.com/2012/03/05/business/media/e-books-on-tablets-fight-digital-distractions.html?scp=1&sq=finding%20your%20book%20interrupted&st=cse
While the article is very interesting, I found the readers comments to the article to be even more valuable. Although a customer can't always tell you what they want in a product when you ask them directly, they are often able to describe it without realizing that they are doing so during other related conversations.

Week 2 - Examining Environmental Variables

Reflections from Chapter 2 of The Marketing Plan Handbook


SWOT
I have used SWOT's several times in my line of work. A key point for me in the text's description of the SWOT analysis is the criteria for evaluating strengths and weaknesses. Although I believe that I have largely understood what is a strength or weakness in terms of assessing capabilities, this section provides a much more structured framework on four areas to consider in these assessments. Using this framework, one can avoid the pitfalls of considering only one aspect (such as our past performance trends) as it relates to identifying and determining whether a resource or capability is a strength or a weakness.


Mission -

This reminds me of a humorous utility once available on the Dilbert website, the Catbert's Random Mission Statement Generator. By entering hot buzzwords, a few other nouns and verbs, "presto" you had a mission statement that seemed to reflect most corporations' versions of the day. The point is, unless the public sector and employees find real meaning in the Mission Statement, it has little impact to achieve the desired results.


Today it seems like more thought has been put into the message and wording of mission statements and I see much more buy-in from employees. The mission has leaned more towards a market and consumer focus, and through meaningful communication of the mission and values, these statements are aligning the perceptions and behaviors of both consumers and employees in a favorable way.


The External Environment-
Unlike assessing the internal environmental factors, the external environment is outside of the company's control. Thus, it bears very serious attention in the context of the marketing plan, since the company will want to be able to plan and adapt as quickly as possible. The key learning to me on this concept is that the evaluation must be a continuous process, as these external forces are dynamic and always changing.


In the video prepared by Professor Talbott, I found value in the concepts of Consumer Behavior (which is a psychological subject in its own right), and the influences and stimuli that affect preferences and demand for products and services. One of the most powerful marketing messages is word of mouth - thus, it is critical for industries that depend upon a perception of good quality to not disappoint even a small segment of their market in this respect. This is especially important in this day of information technology, where reviews (good and bad) are available far and wide, and quite impossible to control.


One of the most amazing shifts in marketing due to external environment in my mind is with the transformation of the recorded music industry. With the advent of emerging technology to save and replay songs as files, which could be duplicated and shared with little effort, it is no wonder that artists and studios alike combined forces to pursue legal action against emerging sites such as Napster. Recognizing that the technology was beyond the point of no return for CD sales, and that the value of broad musical entertainment demand by consumers is practically insatiable, Apple's foray into not only a device to play the music but a vast revenue generating and secure delivery system was nothing short of genius. 


Another interesting example to me was the shift of the margarine industry away from using hydrogenated oils (trans-fat). For years, margarine was marketed and promoted as healthier than butter, and almost every calorie and fat conscious household was sucked into the myth. As more and more evidence indicated that trans-fat was actually worse healthwise than butter, the industry underwent a fundamental change to their product and their marketing strategy. As a consumer, I have to say that I have completely lost faith in these so-called healthier substitutes, and I now lean towards the natural route of just using butter (in moderation).

Attributed to: Joe McWilliams, LostWackys.com

Week 1 - Getting Started

Believe it or not, this is the first blog I have ever setup. The primary focus of this blog will be to document my learnings for C570 - Strategic Marketing Management through Indiana University Kelley School of Business.


Week 1 - Setup the blog - check! (now if I can only remember my new credentials later!) Contribute a thought on "What is Marketing" to Professor Talbot's WIKI, check!
Materials - Chapter 1: Marketing Planning: New Urgency New Possibilities, Marketing Myopia - an HBR article by Theodor Levitt, Jeff Bezos Amazon/Zappos video, and Prof Talbott's introductory video.


Goals for this week - The mechanics of the course: Understand the syllabus, meet my team members (I am on Team 6), understand what I am individually accountable to deliver and what projects for which I need to work with my team.  Oh, and get an idea from the introductary materials on whether my view of "what is marketing" is an accurate representation.


Reflections on Marketing Myopia -
My company's product for the consumer is "power". Whether that be from the power to move materials for transport, to move dirt for construction, to do heavy lifting, or to generate electricity, our products revolve around this essential aspect of customer desire. Our primary portfolio consists of engines that produce this power. I have always had a nagging notion in the back of my mind that our society's reliance on non-renewable energy sources, such as fossil fuels, is not a sustainable long term solution. Thus comes the conundrum of a company that is so reliant on the existence of fossil fuels for its existence.
    The company is also very focused on emerging markets at the present time, capitalizing on the key watchouts outlined in the article, such as a more affluent customer base to buy the product, no cost effective viable alternatives to conventional engine products, and reliance on economies of scale for mass manufacturing. In the short term, this strategy should be incredibly successful in achieving growth targets. However, as world demand for limited resources grows, there will come a point of ecomomic adjustment that will require us to think about how to provide power to meet customer needs in more innovative ways.
    A key point in this article is the difference between "selling" and marketing. I had always associated the two together, so one misconception has been exposed. The fact that selling focuses on the needs of the seller, and marketing focuses on the needs of the buyer is a key learning point.


Reflections on The Marketing Plan Handbook, Chapter 1 -
Chapter 1 of the text provides a good overview of various fundamental aspects of marketing when considering the creation of a marketing plan. In the text, the four Guiding principles in building a marketing plan are described: Anticipate Change, Engage Everyone, Seek Alliances, and Make Marketing Meaningful. I was particularly struck by the Engage Everyone principle, as I have not often seen this principle in action, but see the potential benefits. My role is in the technical aspect in my company, and most of us "nerds" spend our days developing and supporting products for which we have little visibility as to the value niche these products are targeted. Imagine how much more effective we could be if in addition to understanding the company mission, values and goal trees related to the technical work, the technical community was given a strategic overview of the marketing plan for a particular product development. Sure, someone takes the marketing info to develop a package of requirements for the designers to go about their work, but connecting these designers to the face and voices of the customer would be very powerful in inspiring innovation and meeting these needs much more effectively.