Course structure
716
Identifying
problems
Analysing
customers
Analysing
context
Analysing
distribution
Analysing
resources
Strategy
develop
–
ment
Strategy
evaluation
Implement
–
ation
Introduc
–
tion
Today
Learning objectives
1.
Analysing market data
2.
Learning about segmentation, targeting and
positioning
3.
Learning about distribution
4.
Explain pricing
4
Agenda
•
Who is the customer?
•
Segmentation
•
Positioning
•
Distribution channels
•
Pricing and margins
Customers
Who and how many?
6
Classic strategy mistake:
“We don’t want to overly define our customers because many people could use our products”
Customer in ‘small red car market’
Jaguar F typeToyota Corolla
NZ RRP $144K – 255KNZRRP $29K – 39K
|
7300 Corolla |
||
|
; |
7% |
“Jaguar 548 new vehicles “sold in registrations in 2021 up from 2021of new 140 in 2007 – a 291% growth passenger car sales in in 14 years”NZ”
8
Market data: Yoghurt example
Source: Passport
28.5
29.0
29.5
30.0
30.5
31.0
31.5
32.0
32.5
2014
2015
2016
2017
2018
2019
Volume (000 tonnes)
Yoghurt
24,000.0
24,500.0
25,000.0
25,500.0
26,000.0
26,500.0
27,000.0
2013
2014
2015
2016
2017
2018
Volume (tonnes)
New Zealand Milk Yoghurt
82.8
83.2
83.6
84.0
84.4
84.8
2013
2014
2015
2016
2017
2018
Percentage of total
New Zealand Milk Yoghurt
0
5
10
15
20
25
2013
2014
2015
2016
2017
2018
Volume (tonnes)
New Zealand Non
–
Animal Derived
Proteins Yoghurt
Target market process
Four bases for market segmentation
Graphic source: https://surabhiudas91.wordpress.com/2014/09/26/nestle
–
slim
–
milk
–
segmentation
–
targeting
–
and
–
positioning/
Application to small car market
The market segments differ for the two ‘small red cars’
Examples
Market size – estimation
· Market size can be estimated based on the size of the targeted market segment, frequency of purchase, and price paid each time.
· E.g., 1000 customers; buys 1 set of shampoo/conditioner per month; $20 each purchase = $20,000 per month (or $240,000 per year) – customer profile can help!
· Once we select the target market, we can decide how to position our product – reach out to them and make them perceive the uniqueness of product and how it meets their needs.
Caution: making sense of the market data
BEWARE:
· Market boundaries (what is included in the definitions)
· Wholesale or retail $; or volume?
· Market share? (share of what and long-run?)
· Data sources and calculation methods?
· Market growth by segment?
Target market size estimates are important for sales forecasts
· It is not straight forward to find specific market size data for your product, especially for SMEs
Positioning map
–
competitors
•
Map your product or service relative to alternatives
•
Dimensions
based on what is important to
target
customer
•
Identify gaps
4
Ps or 7 Ps of marketing?
Not theories but taxonomies
–
activities and a checklist for
strategy
Who is the primary customer?
•
“Averaged”
or
individual customers?
•
End
–
user
or
distribution channel?
Important: Product
–
market fit
•
Aligning ‘product offering’ to ‘customer needs’ of
the target market is critical
•
Need to regularly check the STP process
•
Is there a creative way of identifying target
customers?
Customer focused strategy – main points
1. Identify the customer that best matches your firm’s values and capabilities – and offers the best profit potential
2. Understand what that customer values – in detail
– and track the customer’s purchasing behaviour
3. Implement a business model that allows your firm to best satisfy the primary customer’s needs and preferences
4. Build systems to flag changes in customer needs
Source: Simons (2014)
Distribution Channels
21
Distribution channels
–
Consumer products
Graphic source: https://courses.lumenlearning.com/marketing
–
spring2016/chapter/putting
–
it
–
together
–
place
–
distribution
–
channels/
Distribution channels
–
another diagram
Graphic source: http://www.pjmconsult.com/index.php/services/distribution
–
channels
Distribution channels
–
Push vs Pull
Source: http://rachanachadha.blogspot.com/2014/09/distribution.html
How to use distribution details?
•
To find out the main distributors or specialized
distributors
•
To know which channels are being used by your
main rivals.
•
You may choose the same channel or find one with
no (or less) competition for your product
Pricing
–
different types
•
Source: https://www.mbaskool.com/business
–
concepts/marketing
–
and
–
strategy
–
terms/18091
–
pricing
–
strategy.html
Simple channel pricing model
Manufacturer
Wholesaler
Distributor
Buyer
RRP
$ 10.00
Actual price paid $ 7.50
)
% discount
(25
Cost to distributor $ 5.00
% margin of $
2.50
33
Cost to wholesaler $ 3.40
32
1.60
% margin of $
Variable cost to produce $ 2.50
% margin of $
0.90
26
Covers
:
Sales
Promotion
Overheads
ROI
Covers
:
Distribution
Promotion
Wastage
Overheads
ROI
Covers
:
Warehousing
Logistics
Overheads
ROI
Note: Goods and services tax not included
Logical errors in pricing
· Cost plus (lazy or wasted opportunity)
· Low prices are an obstacle in future (reduction is easy but increasing is tricky)
· Discounting too quickly & frequently (are you targeting the right customers?)
· The “lower price = higher volume” delusion
· Assuming that competitors will not reduce their prices
· May not translate to higher demand/volume – see example
Example: Reduce price 20% to achieve
40
% increase in volume
Unit price:
$10
Reduce 20%
$8
Unit
c
ost:
$5
$5
Contribution margin:
$5
$3
Unit sales:
10000
Increase 40%
14000
Revenue:
$100,000
$112,000
Total contrib. margin:
$50,000
$42,000
Digital Marketing
· Promotion of products or brands using different forms of electronic media
· E.g., 71 per cent of consumer more likely to purchase from brands they follow on social media
Graphic source: https://fourweekmba.com/distribution
–
channels/
Search engine
SEO or SEM?
Social media
SMO or SMM?
Preparing for your workshops
· Identifying your customer by market segmentation process – segmenting, targeting, positioning
· Use of reliable databases and other sources is important – may need more than one source
· Create a customer persona that best represents the targeted market segment (humanize it with characteristics)
· Estimate the market size – price x units sold in a period
· Identify the main distribution channels to reach the target customer?
· What digital strategies are most appropriate?
