LECTURE 5 CUSTOMER ANALYSIS INTERNAL ANALYSIS

CUSTOMER ANALYSIS

MARKET SEGMENTATION 1- Segmentation

Market Segmentation

A technique that involves breaking down or building up of potential buyers into groups, which are called market segments.
Each segment possesses a homogeneous characteristic that relates to its purchasing behavior and response to a marketing program. Market segmentation arose because an organization cannot be all things to all people.

CustomerCharacteristi cs

ProductRelated Approaches

Basis of segmentation
Customer characteristics: Age: Colgate toothpaste (adults and children) Gender: Nike woman Income: A, B, C etc Lifestyle: conservatives, hippies etc Occupation: Professionals, Blue collar etc Geographic Location: Urban, rural etc Product-Related Approaches User type: Appliances (Home owner vs Remodeler vs Decorator etc) Usage Rate: Heavy/Medium/Light Usage Loyalty: Hard-core vs Somewhat vs Switcher Usage Status: Non-users, potential users, first-time users, regular users Price sensitivity: Hyundai versus Mercedes

Segmentation by Age

Segmentation by Gender

SEGMENTATION BY INCOME
7

Consumers are classified on income levels and different products/services are offered to each segment

Premium product providers include:

Moderate income providers include:

Neiman Marcus Visa Signature Card and American Express Centurion Card

Family dollars, Wal-Mart, dollars general When family-dollar real estate experts search for new locations, they look for lower-middle class neighborhoods where people wear less expensive clothes

Segmentation by Usage: Occasions

Types of Usage:
Different

segments use the same products differently Orange Juice:

Breakfast

drink Alternative drink to soft drinks

BOTOX
Injections

in cosmetic

surgery Treatment of migraines

Segmentation by Usage: Usage Rate

Usage Rate: light, medium , heavy product users

80/20 Rule: 20% of your customers generate 80% of your sales Burger King:

Super-fans aged 18 to 34 They are 18% of the stores customers and deliver 50% of all customer visits where they frequent burger king 16 times per month Developed a Monster Burger campaign claiming eat like a man, man

10

SEGMENTATION BY USAGE: LOYALTY

Loyalty:

Segmented according to loyalty:

Hard-core Loyal: repeatedly use the same provider Somewhat Loyalists: loyal to 2 or 3 brands of a given product or favor one brand while sometimes buying others Switchers: constantly trying different products/services Apple loyalty (Macolytes) versus Microsoft loyalty

Computers:

11

SEGMENTATION BY USAGE: USAGE STATUS

Usage Status: Non-users, potential users, first-time users, regular users

P&G baby products

New parents are potential users of baby products P&G acquires lists of parents-tobe or baby showers and target them with product samples for pampers and other baby products to capture a share of future purchases

Selecting the target market

12

Undifferentiated (Mass) Marketing

Differentiated (Segmented) Marketing

Concentrated (Niche) Marketing

Micromarketing (local/ individual)

Mass marketing versus Segmented marketing

13

Henry Ford, when he first introduced the Model T, was quoted as saying:

You can have any color car you want as long as it is black

Mass marketing versus segmented marketing

14

Mass marketing means developing the marketing mix to appeal to the largest number of people possible with the underlying assumption that everyone wants more or less the same thing
cost Limitation limited usefulness due to the large differences in demands of the consumer market
Advantage

Thus arises the rationale for segmentation

Segmented Marketing
15

The company divides the market into segments (similar groups with distinct needs, characteristics or behaviors who might require separate products or marketing mixes) and designs separate offers for each segment.

Segmented Marketing
16

Estee Lauder: Creates differentiated brands that serve the needs of different segments:

Original Estee Brand (Original Blue and Gold Packaging ): Targets older baby boomers Clinique(Most popular brand stressing free trials, makeovers and gifts offers): Targets younger to middle-aged working women and moms MAC: for the young fashionforward woman using Pamela Anderson in ads Stila Line: for the younger and trendy generation featuring lots of shimmer and unique packages and clever containers

Concentration Marketing
17

Involves targeting one segment of the market

E.g. targeting the largest segment E.g. targeting a niche

Example:

Technology: Apple
Once had a 13% market share in the PC market but now it only holds a 2% share Instead of competing with other PC makers in the price war, they focused on research and development making itself a trendsetter in the business When they introduced the iPod, they captured >70% of the music download market

Micromarketing
18

Products which are tailormade to suit individual needs Examples;

The tailor custom-made suit The cabinet-maker who makes furniture to order NikeID website where consumers can personalize their sneakers by choosing between hundreds of colors and adding an embroidered word or phrase on the tongue

2-Customer motivations

What lies behind customer purchase decisions?

Motivations can be many therefore group them to groups and assess importance Then identify the motivations that will play a role in your strategic decisions

Grid for air travelers: Segment

Motivation

Business

Reliable service Convenient schedule Easy-to-use central airports Frequent flyer program Price Feasible schedule Connecting Flights

Vacationer

Grid for Retail Food Products

Consumer Motivation Strategic Decisions made by Sellers in the form of New Offerings: Salad Bars Organic Food Outlets Asian /Indian/Italian Food restaurants Home-made food providers Frozen meals Large supermarkets prepare cooked offerings

Customer Segment

Weight-conscious / Health conscious Different ethnic groups / Individuals who want variety Working People

Fresh and Natural Food Low-fat Ethnic Eating

Fast Meal Solutions for working people

INTERNAL ANALYSIS

Performance Measures (Beyond Profitability)

Customer Satisfaction

Product/Service quality

Brand/Firm Associations

New Product Activity

Manager/Employee Capability/Performance

BCG Growth Share Matrix

STAR
HIGH
MARKET GROWTH RATE

QUESTION MARK

???
CASH COW DOG

LOW HIGH
RELATIVE MARKET SHARE

LOW

BCG Growth Share Matrix

STAR
HIGH LOW
MARKET GROWTH RATE

QUESTION MARK

Increase shares: Will become a Growth Strategy star thus invest in SBU (More investments for growth Or Eventually turn to cash cows Maintain such shares: will become when MK GW ) dogs thus divest the SBU

CASH COW
Maintenance Strategy (No investment Just Milk the cow) HIGH
RELATIVE MARKET SHARE

DOG
Divest Or Examine for compensating factors

LOW

BCG Growth Share Matrix for a Healthcare Organization

STAR
D E F B
HIGH LOW
MARKET GROWTH RATE

? QUESTION MARK
A. Nursing Home B. Surgery department C. Emergency department D. Occupational Health Clinic

CASH COW
C A

DOG
G H

E. Assisted living Center F. Home Health Agency

G. Primary Care Clinic

H. Rehabilitation Center Current

HIGH

LOW
RELATIVE MARKET SHARE

Projected (5 years)

General Electric Strategic Business Planning Grid

BUSINESS STRENGTH
STRONG AVERAGE WEAK

Receive further investment for growth Maintain level of investment

Drains resources thus should be harvested or divested unless..

HIGH MEDIUM LOW

MARKET ATTRACTIVENESS

General Electric Strategic Business Planning Grid

BUSINESS STRENGTH (e.g. size) STRONG Premium
Provide maximum investment Diversify world-wide Consolidate position Seek to dominate

AVERAGE Selective
Invest heavily Seek attractive new segments to supply strength

WEAK Protect/Refocus
Defend strengths Refocus to attract segments Evaluate industry revitalization Monitor for harvest or divestment

HIGH MEDIUM LOW

MARKET ATTRACTIVENESS (e.g. profitability)

Challenge
Build on strengths Define leadership implications Avoid weaknesses

Prime
Segment market Make contingency plans for vulnerability

Restructure (Harvest or divest)

Provide no unessential commitment Position or divestment OR Shift to more attractive segment

Opportunistic
Ride market and maintain overall position Seek niche markets Seek opportunity to increase strength Invest through maintenance levels

Opportunistic
(Preserve for Harvest)
Act to preserve or boost cash flow And catch sales OR Prune product lines ad minimize investment

Harvest or Divest
Exit from market or prune product lines Maximize present values Concentrate on competitors cash generators

Examples of Factors that may be Used to Compose the Axis Indices

Market Attractiveness Overall market size Annual market growth rate Competitive intensity Technological requirements Profitability Government regulations Economic Trends Business strengths Size Growth Customer loyalty Margins Strong distribution channels Technology skills Patents Flexibility

DECISION TREE

Decision tree

A decision tree (or tree diagram) is a decision support tool that uses a tree-like graph of decisions and their possible consequences. Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal.

A decision Tree consists of 3 types of nodes:

Decision nodes - commonly represented by squares Chance nodes - represented by circles End nodes - represented by triangles

Start by assigning a cash value or score to each possible outcome. Make your best assessment of how much you think it would be worth to you if that outcome came about. Next look at each circle (representing an uncertainty point) and estimate the probability of each outcome. If you use percentages, the total must come to 100% at each circle.

Where you are calculating the value of uncertain outcomes (circles on the diagram), do this by multiplying the value of the outcomes by their probability. The total for that node of the tree is the total of these values.

Class exercises
1.

Give an example for a company/industry for each type of targeting: User type, Usage Rate, Usage Loyalty, Usage Status, Price sensitivity Give an example for a company for each type of targeting (mass, differentiated, concentrated, micromarketing).

1.