Market Segmentation Seminar - RIC Centre · monitors engine performance and generates e-reports ......

Market Segmentation Seminar

Part of RIC Centre Volunteer Advisor Program

A Critical Element of a Marketing Framework To Successful Commercialization

Prepared By

Facilitator Background

• RIC Volunteer Advisor

• Principal at K+S and Associates

– Specialized in Strategy Development, Project Execution and Change Management

• Sales and marketing career background in biotechnology sector

• Specialized in new products commercialization

2Market Segmentation Seminar – Part of RIC Centre Volunteer Advisor Program

Objectives Of Market Segmentation Seminar

Increase The Success of Commercialization

1. Understand how to generate deep customer insights

2. Position yourself to make strategic choices and decide on “where to play” and “how to win”

Improve Alignmentand Strategic Performance

3. Know your business4. Grow team confidence, alignment and co-

ordination around strategic decision making


Why Market Segmentation?

• It is a critical element of successful commercialization

• It positions an organization with a commercial advantage

1. Way of breaking down your total potential market into small homogenous components (market segments)

2. Allows marketer to find commonalties across the market segments

3. Reduce the risk in deciding where, when, how and to whom a product or service will be marketed

4. Target the right customer

5. Results in smart use of resources by directing targeted strategies


Table Of Contents

5

Discussion Topics Page

1. Background & Context 6-9

2. Market Segmentation Overview 11-14

3. Example – A Stepwise Approach 16-26

Market Segmentation Seminar – Part of RIC Centre Volunteer Advisor Program

Context


MARKETSEGMENTATION

Our value propositionOur competitive advantage Targeted Customer

Strategies

Where will we compete?

Our geographic, product categories, consumer segments

Answers and decisions are achieved through a marketing framework

The Overall Strategy Should Answer Five Essential Questions*

What is our winning

aspiration?

Where will we play?

How will we win?

What capabilities must be in place?

What mgt. systems are required?

* Adapted from Rotman Magazine Winter Issue 2013 7Market Segmentation Seminar – Part of RIC Centre Volunteer Advisor Program

1

2

3

4

5

The Marketing Framework Structures A Process

8

These analyses from the market assessment come together to generate key market insights that will inform decision making on strategy


Plan Of Action

StrategyDevelopment

MarketInsights

CustomerAndProductAnalysis

Competitivelandscape

Analysis ofForecasting

Drivers

Market Assessment

Choose Where To Play

Decide How To Win

Understand Strategic Choices

Execute

9

What motivates

the customer segments to behave the way they do?

What is the customer journey? What are their behaviors that lead to their choice of brand? What are

the desired behaviors?

What are the brand benefits offered to the customer and how does this

compare to the competitive

offering?

Buying Process

Customer Portrait®

Brand Benefit Ladder

What are the brand

attributes preferred by

the customer?

Product Attribute Analysis

It is broken down into five analytical assessments to gain a deep understanding of the market

Market Segmentation Is A Critical Element Of The Five Assessments and Overall Commercialization

What are the distinct

customer segments with

unique characteristics and behaviors?

Market Segmentation


Customer and Product Analysis Is A Crucial Element Of The Market Assessment

10






11

What Is Market Segmentation?

Market Segmentation is the process of identifying unique segments of an addressable market.

It can be driven by qualitative or quantitative data requirements.

Market Segmentation can be structured in various ways to identify distinct segments of customers that make up your total addressable market.

What?


Total Addressable

Market

Total Addressable Market

Served Addressable Market

Target Market

• Captures All Potential Markets/Customers

• Captures segments that aligns with your value proposition and capabilities

• Go-to-market

• Aligns with your direct path to success

12

Why Do Market Segmentation?

Positions you to examine the different opportunities across the segments• Allows you to characterize the behaviours of your customers• Tool to quantify the size of the segments• Illustrates revenue projections across the segments and market share

Informs On Key Activities:• Informs R&D• Informs positioning and messaging• Informs pre-launch and launch activities

Informs On Key Strategic Decisions:• Helps to prioritize market segments (“Where to Play”)• Positions you to choose specific, targeted strategies• Decide on sequence of market entry (“How to Win”)

Why?


13

What Are The Benefits?

• Faster Uptake

• Higher Market Share

• Higher Customer Retention

• More Efficient Resource Allocation

• Enhanced Profits

Benefits?


How?

14

How Do You Do Market Segmentation?

• Market Segmentation is often demonstrated as an illustration or framework to identify distinct segments of customers with unique requirements, characteristics and behaviours

• The totality of the distinct segments make up the total addressable market• It is accomplished in a stepwise approach


15






Example Of Stepwise Approach

16

Background InformationA company developed a new electronic device that

monitors engine performance and generates e-reports

New Device • 2x faster than the competition• Less reporting errors vs. competition• It can be used on engines across different industries• It is compatible with engines from different manufactures• It is a pocket size device that can be connected to any computer or smart phone• It can be used in any location

Competition X • Slower monitoring time• Some reporting errors• Manufacturer specific (sold to manufacturer dealership service centres)• Bulky system on wheels that takes up space

Competition Y • Slower monitoring time• Some reporting errors• Applicable across all manufactures (sold to franchise and private repair service

centres)• Bulky system on wheels that takes up space

Future Competitors

• 3 years away


Step OneIdentify Market Segment Variables

17

Identify Market Segment Variables

• Plot the market segment variables on a 2x2 grid

• Can be based on multiple dimensions

• Choose variables that are actionable and meaningful

• Criteria for choosing variables?Distinct segmentsQuantitatively uniqueQualitatively unique


Example A (High Level)


Industry Categories

AutomotiveIndustry

Marine Industry IndustrialEquipment

Transportation Industry

Consumers

Manufacturer Service Centres

Franchise Repair shops

Private RepairOwnership

Vehicle Owner

Example of segmentation model that examines different

industries and the different types of consumers

Example B (Lower Level)


Automotive Consumer


Franchise Repair Shops

Private Repair Ownership

VehicleOwner

Buyers and Buying

Influencers

Owner

General Manager

Procurement / Purchasing Manager

Foreman / Supervisor

Service Mechanic

Owner

Example of segmentation model that examines one

industry and buyers/influencers

20

Market Segment F

Market Segment B

Market Segment A

Market Segment D

Market Segment C

Market Segment E

Use The Variables To Identify and Define Unique Market Segments

• Group segments where there are similarities or keep them separate

• Clearly Describe Each SegmentCharacterize the behaviours of your

customers in those segmentsQuantify the size of the segmentsDefine competitive environment within

segments• Validate and Refine Through:

Qualitative market researchQuantitative market research

Step TwoIdentify Distinct Market Segments


Automotive Consumer Categories




Vehicle Owner

Buyers and Buying

Influencers

Owner

General Manager



Service Mechanic

Owner

Example A

21

Illustrates the breakdown of distinct market segments Illustrates grouping of markets that show similar characteristics

Identifies who makes the purchase Identifies who influences the buyers decisions

Market Segmentation Seminar – Part of RIC Centre Volunteer Advisor Program 21

-The Procurement Manager is buyer with approval From GM and foreman/supervisor

-Not The buyer-Motivated to achieve efficiency-Influences the foreman

- Influences procurement Mgr.-Accountable to improve efficiency

-Motivated to improve efficiency-influences procurement manager

Mechanic is buyer-motivated to achieve shop efficiency

-Owner is buyer

22

Shows Size Of Market Segment Examines competitor environment

Characterizes market segment complexity Defines overall market segment attractiveness

Example B





Vehicle Owner

Buyers and Buying

Influencers

Owner

General Manager



Service Mechanic

Owner

• Perform 70% of vehicle repairs• Competition X entrenched in

100% of manufacturer service centres

• Competitor Y entrenched in 100% of franchise repair shops

• Requires more complex selling model...multiple decision makers influence purchasing

• Perform 25% of vehicle repairs

• Competition Y 60% penetration

• Less complex selling model

• Perform 5% of vehicle repairs

• No competition• Retail selling strategy

Highly Attractive Market


Attractive Market

Less Attractive Market

Step 3Prioritize Launch Strategy

23

Prioritize and Sequence Market Entry

• Prioritize most attractive markets

• Sequence market entry

• Project market penetration and or market share (if applicable)

• Calculate the expected forecast and revenue projections (if applicable)Priority 5

Priority 1bLaunch

Take Share

Priority 1aLaunch

Take Share

Priority 3Develop Market

Priority 2Post Launch Take Share

Priority 4






Vehicle Owner

Buyers and Buying

Influencers

Owner

General Manager



Service Mechanic

Owner

Example


24

Launch Priority #1

• Take Share Strategy• Year 1 Sales $X• Year 1 Market Share X%

Launch Priority #3

• Costly selling model for 5%

Launch in 1st year Launch in 2nd year

Find Partner

Launch Priority #2• Take Share &

Develop Market• Year 1 Sales $X• Year 1 Share X%

Three Important Reminders

• Ensure market segmentation variables are actionable and meaningful

• Ensure that the market segments are uniquely characterized to inform decision making

• Ensure the segments make up the total addressable market as you know it


Conclusions

• Market Segmentation is a straight forward exercise

• It is a critical element of a marketing framework to successful commercialization

• It is a fundamental element of customer analysis, generating insights and informing strategic decisions

• The benefits of market segmentation cannot be ignored


Thank You


www.ksandassoc.com

Market Segmentation Seminar - RIC Centre · monitors engine performance and generates e-reports ......

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