Segmentation Targeting and positioning

Strategy Formation at the Gas Pump

price wars at the gas pump threatened the profitability

of oil companies, as gas stations often matched prices
to the penny, which significantly eroded their margins.
Oil companies inherently assumed that consumers
were extremely price-sensitive, and that small
differences in price would drive them away to
competitors.

What should a company do?

 The Mobil Way
To better understand its customers and their price sensitivity, Mobil
conducted a study of 2,000 customers and uncovered the following five
segments.
Road Warriors (16% of buyers). Customers, such as salespeople, who
used their cars as part of their profession. They typically drove between
25,000 and 50,000 miles a year, tended to be middle-aged men with
higher incomes who preferred credit cards to cash, liked to buy food
during their visit, and would use the car wash from time to time.
True Blues (16% of buyers). Brand-loyal and occasionally station-loyal
consumers, with moderate to high incomes, who preferred to pay in cash
and buy premium gases
Generation F3 (27% of buyers). Upwardly mobile young consumers who
drove often and habitually purchased a lot of snacks. Roughly 50% were
under 25 years old.
 The Mobil Way

Homebodies (21% of buyers): Stay-at-home mothers who

valued gas station proximity, either to their homes or to
their normal travel routes for their children’s activities.

Price Shoppers (20% of buyers). Customers on a budget

who rarely bought premium gas and were usually not
brand- or station-loyal

You are supposed to decide Mobil’s course of action. What

will you do?
 Age Old Questions for Business

• Who is my customer?

• What does he /she value?

• Can I Cater to him/her profitably?

 Henry Ford vs. Alfred Sloan

• You can get any car as long as it is black

• Tell me color and you will get it

 Who , what Why

Who ? ( who are the customers? Demographic, media

habits, Life styles)

What ( What have the customers done? Usage loyalty,

profitability)

Why ? ( Why do the customers Make the decisions , they

do)
 Bases for Segmentation

• Geographic –territory demarcations

• Demographic – age, family size, Gender,
income, education, religion, etc.
• Psychographic – lifestyle, personality ,
values, activities, Interest, opinion
• Behavioral – knowledge, attitudes , usage
 Behavioral variables

• Occasions – birthdays, lunchtime,

vacations
• Benefits – eg.travel – business,
vacation, educational
• User status – non users, ex users, first
time users, regular users, potential
users
• Usage rate – light, medium, heavy
• Loyalty status – diehards, shifters,
switchers
• Buyer Readiness – unaware – aware –
informed – interested – desire –
intention to buy
• Attitude – enthusiastic, positive,
indifferent, negative, hostile
 Bases for Segmentation
Why: Why do customers make the decision they do? (
Needs, preferences, Decision Process)

What: What have customers done? ( Usage,

Loyalty, Profitability)

Who? : Who are the customers? ( Demographics,

Media Habits, Life Style)
 Criteria for segmentation

• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable
 Which Segment to target

Segment Characteristics ( Segment Size, Growth

Rate, profitability)

Competition ( Competitors’ strength,

competitive intensity, competitors resources)

Company fit: objectives, competencies,

Resources
 Positioning
Positioning is the act of designing the company’s offering and
image to occupy a distinctive place in the mind of target market.

A brand’s position represents its location vis-a-vis its competitors

in the mental maps that consumers construct to represent the
range of possible solutions to their problems. Strong brand
positions are powerful because they help consumers categorize
brands by their similarities and, at the same time, distinguish and
differentiate between brands based on their differences.

A position is a cold-hearted, no-nonsense statement of how you

are
perceived in the minds of your prospects. A positioning statement,
by contrast, expresses how you wish to be perceived
 Crafting Positioning
Positioning statements contain four essential components:

• For whom, for when, for where? An explicit description of the target
market segment that helps consumers easily discern which brands
directly address their specific needs andwhich don’t. This component
can outline a particular type of person (e.g., mothers concerned
about their children’s health), a particular usage situation (e.g., when
you need to decorate your dinner table), and/or a particular usage
location (e.g., when youare on the go).
• What value? A simple, straightforward description of the unique
value claim the brand offers, written from the consumer’s viewpoint.
This will become the thing for which the brand is known. There are
four types of value that customers can derive from a product or
service: economic value, functional value, experiential value, and/or
social value
 Crafting Positioning
Why and how? Evidence that provides consumers with reasons to believe the
brand’s claims. Supporting evidence for the product’s value can come from
logical arguments, scientific and technological data, consumer testimonials,
celebrity or expert endorsements, product demonstrations and experiments,
and independent agency seals of approval.

Relative to whom? An explicit description of the competitive set in which the

brand classifies itself and the alternatives consumers may be considering. This
helps consumers establish a frame of reference for the purchase decision.
This section of the positioning statement can either help consumers classify
the brand as similar to other brands or product categories they are already
familiar with, or differentiate and distinguish it as something completely
different. For example, Hyundai—known for low-cost, functional vehicles—
launched a luxury automobile by positioning it as “a brand new luxury car as
spacious as the Mercedes S-Class, yet priced like a C-Class.” This statement
drew both a parallel to and a distinction between Hyundai and one of the
world’s leading luxury car brands.
 Unique selling proposition
Rosser Reeves, a unique selling proposition (USP) is a type of value
claim that offers a prospective customer a specific, unique, and
superior reason to purchase a product.

Rosser Reeves proposed the USP to capture the “rational” advertising

strategies of the 1940s and 1950s, which viewed customers as logical
purchasers who would listen to a reasoned argument. However, since
the 1960s, marketers have acknowledged that, when making
purchasing decisions, consumers often rely on their “irrational”
emotions, memories, intuitions, dreams, and aspirations.

That insight ushered in a new era, dubbed the Creative Revolution, led
by advertising pioneers David Ogilvy, Leo Burnett, and Bill Bernbach,
who believed that successful brand positions were those that struck a
human Chord
 The 3 C Model of Positioning

Customer Analysis: Relevant, Resonant, Realistic

Competitive Analysis : Distinctive, Defensible,

Durable

Company Analysis: Feasible, Favorable, Faithful

 The 3 C Model of Positioning

Customer Analysis: Relevant, Resonant, Realistic

Competitive Analysis : Distinctive, Defensible,

Durable

Company Analysis: Feasible, Favorable, Faithful

 Crafting Positioning

The four components of positioning statements

can be summarized in this general format:

For [target market], Brand X is the only brand

among all [competitive set] that [unique value
claim] because [reasons to believe]
 Options in front of Sony

Option 3: Adopt an alternative frame of reference

The core insight behind this third option was that it was
possible to transform an engineering dilemma—How
can we eliminate the technological flaws in this
product?—into a marketing challenge—How can we
build enthusiastic demand for this product despite its
flaws? A related insight was the recognition that this
marketing challenge could be solved by positioning the
product in such a way as to establish an alternative
category frame for the product.
 Positioning to Manage the Category Frame

The positioning of any product necessarily involves the

establishment of a frame of reference for the product; this frame
tends to dictate the product category in which consumers will
mentally place the product.

It is possible for a firm to develop a positioning strategy designed

to manipulate the category cues associated with its product.
Why would a firm do this?
Because a product’s category membership can have a powerful
effect on the psychological stance that consumers adopt when
interacting with the product. By manipulating the product’s
categorical frame, a firm can manage the psychology of
consumption associated with the product.
 AIBO is not a robot, it’s a pet with personality

A comparison of perceptions of two categories

Robot Pets
Robots are perceived to be Pets are friendly
threating
Robots are perceived to be Pets are simple are
Complicated specially to unintimidating , even to
people who are not techies children and elderly
Robots are perceived to be Pets are warm and
cold and impersonal affectionate
Robots are supposed to be It’s O.k if our pets are stupid (
smart We love them anyway)
 Take a look
So we understood

1. Why has AIBO been such a hit?

2. What is the VALUE PROPOSITION?
3. How well does AIBO work

Comment on pricing strategy of Sony for AIBO

Is $2500 too much?

Imagine what could have been reaction of the market had it

been $50