Marketing: Janet Brady

Class 2:Part 1
Marketing Strategy Planning,
Identifying Attractive Markets,
Positioning Offerings
Week 1: Creating Customer Value
Key concepts in this lecture:

1. Creating Customer Value

2. An overview of Marketing Strategy
 To show you where we are going
3. Targeting: Defining Markets
4. Segmentation – the customers we want
5. Looking for Trends
6. Positioning offerings
Creating Customer Value

It’s all about the Value Proposition

The Shanghai Maglev Train
The Shanghai Maglev Train

• Top speed is 430 kph

(270 mph)

• 30 Km in just 8
minutes!

• Round-trip, just $10

The Shanghai Maglev Train

• 30 Km in just 8 minutes!
• Top speed is 270 mph
• Round-trip, just $10
• But nobody is taking it to the airport !
Why does no one take this train to the
airport?

1. 22 minute cab-ride
from major hotels
2. Carry your bags up
the escalator
3. Wait in line to buy
ticket
4. Trains depart every
20 minutes
Most of the tickets are sold to tourists
You might as well take Line 2
(a conventional subway)

e2
Li n

Maglev
Contrast this with the
Hong Kong Airport Express
Shanghai Hong Kong

• Top speed is 270 mph • Top speed just 80 mph

• 30 Km in just 8 minutes! • 34 Km in 23 minutes

• Round-trip, just $13 • Round-trip, $23.22

But it’s a great success!

Terminal right to city center

Airport
Central
Hong Kong Airport Express

Enter the train at passenger level

Departures every
12 minutes
Hong Kong Airport Express Understands
the “Value Proposition”

• 270 mph is a “Product feature” that may or may

not provide a value to the consumer
• What the customer wants is to be at the airport
on-time, as cheaply as possible, with zero
“hassle”
• (The customer doesn’t “want” 270 mph)
The “Value Proposition”

Product value Total

customer
Image value value

Customer
delivered
value
Monetary cost
Total
Time cost customer
cost
Energy cost
The “Value Proposition”
Product:
Features (has/has-not)
Performance
Product value Total
customer
Image value value

Customer
delivered
value
Monetary cost
Total
Time cost customer
cost
Energy cost
The “Value Proposition”

Product value Total

customer
Image value value

Customer
Dave Aaker delivered
calls this the value
Monetary cost “self expressive” features
of the brand
Total
Time cost customer
cost
Energy cost
The “Value Proposition”

Product value Total

customer
Image value value
Time?
Buying books from Example: Customer
Amazon Package tour
to Cancun
delivered
value
Monetary cost
Total
Time cost customer
cost
How difficult is the
Energy cost decision?
“Effort”
Understanding the
Value Proposition

• Customers won’t always go for the cheapest

price
• Why I pay more at Amazon.com

• Not every product feature is necessarily product

value to the customer
HOW TO COMPETE IF WE
UNDERSTAND THE VALUE
PROPOSITION
 Understanding the Value Proposition is the
key to successful marketing
• As a firm, what do we have to offer ?
• Product:
 Features
 Design
 Performance
• Image

• What am I asking the customer to trade ?

• Money
• Time costs (waiting is a cost)
• Energy costs (how hard is the decision?)
The “Value Proposition”

Product value Total

customer
Image value value

Customer
delivered
value
Monetary cost
Total
Time cost customer
cost
Energy cost
 Value Propositions that
the customer might care about
• It’s new! (fashion)
• Design (elegant Apple laptop)
• Efficacy—it works (or works better than
others)
• Durability—lasts longer in service
• Convenience in use (aerosol can)
• Guarantee (Hyundai)
• Enhanced offering, complete solution
(BMW maintenance included)
• Service (take most insurance plans)
Value Propositions that the customer
might care about II

• Image can mean many things:

o Status, cool, modern, wealthy
o Others, e.g. “cares about the
environment”, frugal
o Affiliative, e.g. sports team
Summary of Value Proposition

• It’s a trade . . . As a firm, we offer

• Product Value
 Features
 Performance
• Image Value
• Customer considers:
• Money
• Time
• Energy (“effort”)
[Concept Check:
What’s the Value Proposition?]

• Apple Watch
The Apple Watch
Home Run or Hobby?
The Apple Watch
Home Run!
• Initial demand was amazingly strong
• Highly fashionable
– Many faces, many bands
• More features than competition
– Health, notifications, Apple Pay etc.
• Very high margins
– Materials cost less than $100, price around $500
The Apple Watch
Another Hobby
• Early demand ≠ long term demand
– Some customers will buy anything Apple
• Premium too high (2 x’s other smart watches)
• Short battery life, must be charged every day
• Too much like jewelry
• Lead is only short term
• Can only be used with iPhone 5 or above
– Total available market less than 10%, won’t work on 85%
of world’s phones.
 • 3 models; variety of
Apple Watch Launch bands and faces
• Force Touch (tap vs
press)
• Digital Crown
• S1 system-on-a-chip
• Heart-rate sensor and
built-in accelerometer
• Notification center
• Vibration-alert nav
• Pre-orders only at
launch
• Online only until June
• Massive traditional
and new media blitz

• $349 – Sport
38 • $599 – Apple Watch
• $10,000+ – Edition
Apple Watch Launch

Effective marketing?
39
 Apple Watch Launch

Effective marketing?
Time to 1MM units
• iPhone – (2007)
• iPad – (2010) 40
• Apple Watch – (2015)
 Apple Watch Launch

Effective marketing?
Time to 1MM units
• iPhone – 2 months (2007)
• iPad – (2010) 41
• Apple Watch – (2015)
 Apple Watch Launch

Effective marketing?
Time to 1MM units
• iPhone – 2 months (2007)
• iPad – 1 month (2010) 42
• Apple Watch – (2015)
 Apple Watch Launch

Effective marketing?
Time to 1MM units
• iPhone – 2 months (2007)
• iPad – 1 month (2010) 43
• Apple Watch – 1 day (2015)
Marketing Strategy &
Planning

Where are you going?

Four Steps to Marketing Strategy

Define the Market

Segment
the Market,
Choose attractive
segments

Design a
Marketing Mix
to Appeal to the
Target

Position our
offering
Four Steps to Marketing Strategy

People (or firms in B2B) with

Define the Market (1) a need for our product,
and (2) the money to buy

Segment
the Market,
Choose attractive
segments

Design a
Marketing Mix
to Appeal to the
Target

Position our
offering
Four Steps to Marketing Strategy

Define the Market

Segment
the Market, Deciding who
Choose attractive will buy
segments

Design a
Marketing Mix
to Appeal to the Whom are
Target we trying
to delight?
Position our
offering
Four Steps to Marketing Strategy

Define the Market

Target
the Market,
Choose attractive
segments

Design a
Specific mix of:
Marketing Mix
Product, Price
to Appeal to the
Place, Promotion
Target

Position the
offering
Four Steps to Marketing Strategy

Define the Market

Segment
the Market,
Choose attractive
segments

Design a
Marketing Mix
to Appeal to the
Target

Position our In the minds of

offering customers
Advantages of Target Marketing

• The narrower our target:

 More likely our product will delight customers
(as opposed to being “good enough”)
 Cheaper to serve a narrower target
 Easier to communicate with potential customers
 Likely to be more profitable
1.Defining Markets

Opportunities come from unmet needs

(or if not completely “unmet”,
“not very well met at the moment”)
Unmet need in San Franscisco
The Problem with Taxis in SF

• Very restricted number of • Few taxis available on the

permits street
• Several competing • Customers call 3 or more
companies companies
• No “central dispatch” • Taxis show up and the
“fare” has gone
The unmet need led to
new entrants
• Uber
• Lyft
• [Sidecar] closed
Market definition: If you do it broadly, you’ll
come up with new ideas

Is the market:
• Taxi service, or
• Getting from A to B?
Similarly, is the market:
• “Hotels”, or
• A place to stay in another city?
2. Segmenting Markets
Four Steps to Marketing Strategy

Define the Market

Segment
the Market, Deciding who
Choose attractive will buy
segments

Design a
Marketing Mix
to Appeal to the Whom are
Target we trying
to delight?
Position our
offering
Mass Marketing vs. Target
Marketing
The alternative to “Mass Marketing”
is Target Marketing

1. Cut the Market up

(“segment the market”)
2. Choose attractive segments we plan to
target (and which to avoid)
3. Lastly, we design an offering to appeal to
those segments
Possible Dimensions to Segment
Consumer Markets

• Geographic
• Demographics
 Income level, age
• Psychological
 Attitudes, beliefs, personality
• Example: “Fashion forward” “Fashion is a waste of money”
• Product use
 Hobby, on-the-job, special occasion
 Another Example:
Psychographic Segmentation

Throw pillows

Some people care,

Some don’t
More than one segment?

• Primary target segment

• Secondary segment (think “next year”)
• Segments-to-avoid
• Being clear about this will define your position
• Incidental segments
• We’ll serve them, but not attract them
A good strategy identifies
targets to avoid

Segmentation variable 1
Most firms have many offerings targeted to
different segments
Failure to Target

Undifferentiated marketing is likely to be a

muddle and a mess
Summary of Segmentation

Marketers ask:
• What are the possible segments?
• Which are the segments to avoid?
• Which are the primary segments . . .
. . . and secondary?
3. Targeting the
Attractive Segments

Design all four elements

of the Marketing Mix to
“sing together in harmony” ”
The Marketing Mix
(“The Four P’s of Marketing”)

Marketing Mix
Define the Market

Channel
Segment Product
the Market, of
Choose attractive distribution
segments Price

Design a
Marketing Mix Place
to Appeal to the
Target
Promotion
Position our
offering
How we “Target”
Attractive Segments

• Product modifications target customers

need
– Example: Long battery life cameras for
wedding photographers
• Price
– Not just “total”: Credit card, finance options
• Where we sell
– Through Costco . . . or not
• How we promote
(Communicate with our customers)
Make sure all 4 elements
“sing together in harmony”
Making sure the 4-elements
“Sing together in harmony”

•  Hi-end granite counter top firm advertises

“$100 off!” in a “coupon” mailer
•  Economy offering for low-income
consumers. . . that can only be bought with a
credit card on-line
•  Heavy mass media promotion
of a price drop
Trend Analysis
A way Marketers look
around and look ahead to
find opportunities
Trend Analysis
Trends (Summary)

1. Political and legal

2. Economic
3. Social or Cultural
4. Technological
5. Demographics
6. Natural environment
7. Competitive environment
Sometimes something
Negative leads to a
Marketing Opportunity
1a. Political trends

This is a good time

to be building
office space in
Yangon, Myanmar
1a. Political trends

. . . but not so good to

be selling
imported
consumer goods
into Venezuela
1b: Legal environment

• State by state
marijuana
legalization
1c Legal Environment:
Something Negative: TSA

What’s the
opportunity?
1c Legal Environment:
Something Negative: TSA
Left off 5.25
2. Economic Trends
Indian consumers are shifting to more mainstream stores for gold

What economic trend is driving this?

During the pandemic….

“The shift to national and regional brands is clearly on

the rise as consumers get more comfortable
and feel secure in terms of quality, which is still a
problem with the unorganized sector”
3a. Social Cultural (Consumer) Trend:
Millennials don’t cook at home . . .

What’s the
opportunity?

WSJ 27 Oct 2016

3b. Cultural Trend:
Everyone in SF Wears Boring Grey Hoodies

What’s the
opportunity?
4. Technological development leads to opportunities

Touch
screen

flash
memory
5. Demographic trends

1. Low birth rate in Europe

2. Increase in multiple births in the US
3. Increase in move to suburbs
Increase in multiple births . . .
US Demographic trend:
Body weight
is up
6. Natural Environment

2011-15: Drought in California

What was the opportunity?
7. Competitive Environment

Good idea to stay away from markets with:

1. Many well-funded, experienced
competitors
2. A market where everyone is rushing in
Concept Check:
Why are airlines phasing out first class?
break
Summary on Opportunities and Trend
Analysis

• Good marketers are always looking for

opportunities
• The key is an unmet, or poorly met, need
• Most firms conduct formal
Trend Analysis to look for future opportunities
• Sometimes adversity leads to opportunity
What are some opportunities that have
come from the pandemic?
Understanding Positioning

The abstract image of our practice

that exists in the head of customers,
actual and potential
Four Steps to Marketing Strategy

Define the Market

Segment
the Market,
Choose attractive
segments
In the minds of
Design a
Marketing Mix
customers
to Appeal to the
Target As compared to
competitors’
Position our
offerings
offering
Possible Car Positioning

• The ultimate driving experience

• Classic, traditional experience
• Suitable for everyday
• Makes every day a vacation
• The way I show I care about my family
• Fun with friends
• [Note: Not limited to “High end” and “Economy”]
Examples of Positioning
Problems of Positioning:
1. Positioning Paradox

• Positioning is a result of good

Marketing Strategy Planning
• But, to achieve desirable
positioning,
we should begin with an idea of
where we want to end up
Positioning is tricky

Let’s find out why . . .

Problems of Positioning,
2:The position we achieve may not be the position we sought

• Positioning is what customers think about us

—not what we say about ourselves
Problems of Positioning,
2:The position we achieve may not be the position we sought

Whom do you
feature in
• Positioning is what customers
your ads?think about us
—not what we say about ourselves
3. Most products can be positioned in
several different ways
4. The position we’d like to take
may be pre-empted by someone
else
3. The Position you want may have been pre-
empted.

Who owns the position

“original American jeans”?
Can you advertise your destination as
“the most romantic city in the world?”

• [Hint: The answer is not “Berkeley”]

Venice, Italy
4. The Competitive Position may be
different in another (geographic) market:

Honda in Japan “Sportscar” in USA

• Youthful
• Sporty
• Hi-tech engineering
4. The Competitive Position may be
different in another (geographic) market:

Honda in Japan Honda in USA

• Youthful • Economical
• Sporty • Family car
• Hi-tech engineering • “Import”
How we manage
positioning
1. Positioning is achieved by careful blending of all
4 elements of the Marketing Mix

• Product
• Price
• Place - Channel of Distribution
• Promotion
Note: More than just
advertising your way out
of a situation
 2. Positioning has to be credible

“Good for you”

or
“Comfort
food”?
 3. You can nudge positioning, but you can’t
make a magic leap
“. . . turn a brand
once known for
being “cheap and
nasty” into one
offering good
value”

Michael O’Leary
CEO Ryan Air
Bloomberg, May 2015
Old Spice
Old Spice
Break 5.31
Concept check: Can you position Walmart
as “Fashionable”?
Summary on Positioning Strategy

What to know about positioning:

1. Taking a clear position often means giving
up other positions
2. It’s both a driving-force and a result of our
Marketing Mix decisions
Target Marketing
Summary
Target Marketing (Overview)

1. Define the market

2. Find some basis for segmentation
(ways to cut the market up)
a. Identify the segments (give them cute names)
b. Choose “attractive segments”
3. “Target” them
( = design all 4 elements of the Marketing Mix
to delight them)
4. If we’ve done this right, we will have
successfully positioned our product
Example: Segmenting, Targeting & Positioning

• Subaru entered the US

market late
• Pretty cheap
• Completely
undifferentiated from
other Japanese cars
Example: Segmenting, Targeting &
Positioning

• Subaru
• “We are 4-wheel drive”
• Marketing Mix
 Only AWD in US market
 Advertising on this
 Low price
• Who’s the target?
 Demographics?
 Geography?
Now when you think of “affordably priced 4-
wheel-drive, you think “Subaru” !
Marketing Strategy Summary

• Marketing Strategy Planning is a

simple procedure
• “Delighting customers” is what Marketing
is all about
• Most good Marketing is Target Marketing
• “Targeting” means more than just
advertising