Marketing Strategy and Applications: Segmentation, Targeting and Positioning (STP)

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Nov 17, 2013 (3 years and 7 months ago)

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Marketing Strategy and Applications:

Segmentation, Targeting and Positioning

(STP)

John A. Walker College of Business

Appalachian State University

Dr. James E. Stoddard

Professor of Marketing

1

Introduction

Consumer behavior and the buying behavior of organizations

is studied in large part as a prelude to market segmentation.


Firms realize that consumers are too numerous and diverse for

them to produce products that serve everyone’s needs and wants.


Instead, they now identify market segments that they can satisfy

most effectively. This involves
target marketing
rather than
mass marketing
.


Target marketing is a three step process that requires firms to:


1.

S
egment the market


identify and profile distinct groups of


buyers who might require different products or marketing mixes.

2.

T
arget certain markets


selecting one or more segments to satisfy.

3.

P
osition products for the market


establish and communicate the


product’s benefits to each market segment.


STP


2

S
egmenting Markets

The concept of market segmentation is predicated on the notion that

some buyers have needs/wants that are similar to each other and some buyers

have needs/wants that are more divergent.


Think of the consumer market as being composed of people with small price

elasticity of demand curves on their foreheads. Some of these consumers will be

relatively more price sensitive and have elastic demand curves on their foreheads

while others will not be as sensitive to price and have rather inelastic demand

curves on their foreheads.


Based on this story, one could group people together that were price sensitive

and make a product offering to them at a relatively low price, and group the

less price sensitive consumers together and make them an alternative product

offering at a higher price.


This is the foundation for all market segmentation schemes.

3

Market Segmentation

Segmentation theory is based on the idea that firms cannot predict

consumer buying behavior directly, but must infer likely consumer

buying behavior through the use of surrogate variables (i.e., segmentation

variables).


The notion is that consumers that are homogeneous with respect to

the segmentation variables will also be homogeneous with regard to their

buying behavior. Therefore, the firm can assemble a unique, satisfying marketing

mix for that market segment or each market segment the firm wishes

to choose to target.


Peter & Donley have a fairly comprehensive list of segmentation variables

on page 68.


As one can see from the list, there exist many segmentation schemes because

not all segmentation variables are relevant for the purchase of all

products.

4

How is Market Segmentation Accomplished?

Actually, there are several methods or bases used to segment a heterogeneous

market into more homogeneous market segments. They include:


1.

A
-
priori segmentation

2.

Usage segmentation

3.

Segmenting by Attitudes

4.

Needs
-
Based Segmentation


1.

A
-
priori Segmentation


Some researchers use A
-
priori segmentation methods. With A
-
priori

segmentation the market is split according to pre
-
existing demographic criteria

such as age, sex, or socioeconomic status.


This method of segmentation is relatively simple and easy to use since the Census

Bureau collects this information making it relatively easy to identify specific groups

consumers to target (example: age and use of technology).



5

TABLE 7

Rank Order of Product Preferences by Visitor Demographic

(1 = High, 7 = Low)

Product Type


Demographic

Music
Activities

Cherokee Sites

Visiting Farms

Gardens or
Trails

Craft Activities

Outdoor
Recreation

Festivals &
Events

Gender

Female

2

3

5

4

1

7

6

Male

6

5

3

4

7

1

2

Age

Below 25

6

3

1

4

7

2

5

25


35

6

4

1

3

7

2

5

36


45

7

5

3

2

6

1

4

46


55

5

3

6

2

4

1

7

56


65

2

3

6

5

1

6

4

Over 65

1

4

6

5

2

7

3

Education

High School

7

1

2

6

4

5

3

Some College

7

1

2

5

4

6

3

Bachelor’s Degree

3

7

6

2

5

1

4

Graduate Degree

1

7

6

3

2

4

5

Income

$0
-

$24,999

6

2

1

7

5

4

3

$25,000
-

$49,999

2

1

3

6

7

4

5

$50,000
-

$74,999

4

1

3

2

6

4

5

$75,000
-

$99,999

7

3

1

5

2

4

6

$100,000
-

$124,999

4

7

6

3

1

5

2

$125,000
-

$149,999

5

6

7

3

1

2

4

$150,000
-

$174,999

1

4

7

2

3

6

5

Over $175,000

1

7

6

2

5

4

3

Visitor Type

Overnight

1

7

6

4

2

3

5

Day Tripper

7

2

1

4

6

5

3

Key

1 = Highest

2 = Second

3 = Third

Example of A
-
Priori Segmentation

Source: Stoddard, James E., Michael R. Evans and Dinesh Dave’ (2008), “Sustainable Tourism: The Case of the Blue Ridge Nati
ona
l Heritage

Area,”
Cornell Hospitality Quarterly
, 49 (3), 245
-
257.

6

Bases of Market Segmentation

2.

Usage Segmentation


is based on how much customers actually

purchase from the company. The notion is that some customers buy a lot

(heavy users) while others buy less (light users) and marketing strategies can


be formulated for each group.


A logical extension of this “the best and the rest” segmentation scheme is to

identify differences between “the rest”. This may involves splitting customers

into more than 2 groups.


Zeithaml

(2001) recommends using a four group split based not only on

usage (sales or purchases), but also on costs of doing business with the customer

and how easy (or difficult) it is to do business with the customer. Some

customers complain all the time.


She refers to this segmentation scheme as the customer pyramid.

7

Source:
Zeithaml
, Rust and Lemon (2001), “The Customer Pyramid: Creating and Serving Profitable Customers,”
California Management Review, 43 (4), 118


142.

The Customer Pyramid

Platinum

Gold

Iron

Lead

More Profitable

Customers

Least Profitable

Customers

Costs time, effort and

money but does not provide

a high return, difficult

to do business with.

Spends more over time,

costs less to maintain,

spreads positive word of mouth.

8

9

Table 2

Means for information source reliance by information search strategy

Cluster

Information Source

1

Information

Nonusers

2

Aggressive

Searchers

3

Limited

Searchers

4

Balanced

Searchers

5

Past

Visitors

Overall

Sample

Billboards

1.27
d

3.77
a

1.87
c

2.32
b

1.67
c

2.14

Brochures

1.45
c

4.36
a

3.54
b

3.61
b

3.38
b

3.29

Guides

1.43
d

4.31
a

3.38
b/c

3.53
b

3.17
c

3.17

Internet

1.21
d

4.33
a

4.08
b

3.53
c

3.93
b

3.39

Magazines

1.21
e

4.36
a

1.51
d

3.07
b

1.82
c

2.36

Newspapers

1.22
d

4.45
a

1.34
c/d

3.04
b

1.44
c

2.31

Previous Visits

2.65
c

4.56
a

1.17
d

3.96
b

4.55
a

3.58

Radio

1.12
c

4.53
a

1.07
c

2.46
b

1.11
c

1.89

Television

1.15
c

4.57
a

1.20
c

2.68
b

1.24
c

2.06

Welcome Centers

1.44
e

4.37
a

2.36
c

3.37
b

2.06
d

2.75

Size

301

141

191

314

312

1259

Percent

23.91%

11.20%

15.17%

24.94%

24.78%

100%

Note: Means within a row with matching superscripts are not significantly different, p < .05, following ’s
multiple range procedure.

AN EMPIRICAL TAXONOMY OF TOURIST

INFORMATION SEARCH STRATEGIES, Clopton, Stoddard & Evans

Another Example of Usage Segmentation

Bases of Market Segmentation

3.

Segmenting by Attitudes & Perceptions


attitude segmentation seeks

to group together customers that have similar feelings and beliefs about the

issue in question. Can be measured by agreement scales to statements about

the issue.


Example:


Automobiles should be more environmentally friendly.


Disagree

Agree

1

2

3

4

5

6

7

Incandescent light bulbs should be replaced with compact florescent lamps

(CFLs).

Disagree

Agree

1

2

3

4

5

6

7

This information is particularly useful in determining positioning strategies,

keeping the brand properly positioned with particular market segments.

10

Bases of Market Segmentation

4.

Needs
-
Based Segmentation


typically provides the most actionable

results since the outcomes of this segmentation scheme tell the marketer

the types of attributes and benefits the product must provide to satisfy

various market segments.


The difficulty with this type of segmentation base (and also with segmentation

based on attitudes and perceptions) is connecting the resulting market segments

with demographic variables.


After all, demographic variables are the ones identified by the Census and tell

marketers where certain types of customers are.

11

Example of Needs
-
Based Segmentation

Using Cluster Analysis

Cluster analysis is a mathematical technique that is used to form market

segments. Rather than segregating or dividing a heterogeneous markets

into homogeneous groups based upon differences between individuals, the

procedure agglomerates or aggregates groups of people that are similar to

each other.

The marketing manager for
Audiotronics

Software Company is seeking new
market opportunities. He is focusing on the voice recognition market and
has narrowed down to three segments: the “fearful typists,” the “power
users,” and the “professional specialists.”

Example
1

1
(Source:
Perreault

and McCarthy (2002),
Basic Marketing, A Global
-
Managerial Approach, 14/e, Boston: McGraw
-
Hill Irwin.)

12

The “fearful typists” don’t know much about computers


they just want to
create e
-
mail messages, letters, and simple reports without errors. They don’t
need a lot of special features. They want a simple program that’s easy to learn.


The “power users” know a lot about computers, use them often, and want a voice
recognition program with many special features. All computer programs seem
easy to them


so they aren’t worried about learning to use the various features.


“Professional specialists” have jobs that require a lot of writing. They don’t know
much about computers but are willing to learn. They want special features
needed for work


but only if they’re not too hard to learn and use.


The marketing manager prepared a table summarizing the

importance of each of the three key needs in the three segments.

Example of Needs
-
Based Segmentation

Using Cluster Analysis

Importance of Need (1 = Not Important; 10 = Very Important)

Market Segment

Special

Features

Ease

of
Use

Easy

to
Learn

Fearful Typists

3

8

9

Power Users

9

2

2

Professional Specialists

7

5

6

13

Example of Needs
-
Based Segmentation

Using Cluster Analysis

Audiotronics
’ sales staff conducted interviews with a
potential
customer who was

asked
to rate how
important each
of these three needs were in her work. The

manager prepared
a spreadsheet to help him cluster (aggregate
) this
person into

one
of the segments


along with other
similar
people.


Each person’s ratings are entered into the spreadsheet and
the
clustering procedure

computes
a similarity score that
indicates
how similar (a low score) or dissimilar

(
a high score
) the
person is to the typical person in each of the segments.


The manager can then aggregate potential customers into the
segment
that is most

similar
(that is, the one with the
lowest similarity
score).

Importance of Need (1 = Not Important; 10 = Very Important)

Market Segment

Special

Features

Ease

of
Use

Easy

to
Learn

Fearful Typists

3

8

9

Power Users

9

2

2

Professional Specialists

7

5

6

Hypothetical Customer

8

4

7

14

Example of Needs
-
Based Segmentation

Using Cluster Analysis

Using the information in the table, we can now compare a hypothetical

customer to the types shown above. This is accomplished by computing a

similarity score
for each feature. Then, we can compare our hypothetical

customer to the types shown above and determine which segment the

hypothetical customer fits into.


A simple measure of similarity is the
sum of squared distances
between the

hypothetical customer and each market segment “typical” customer. This

measure is called the squared Euclidean distance.

The sum of squared
Euclidean distances
is computed as:


d
= (
X
t



X
h
)
2

+ (
Y
t



Y
h
)
2

+ (
Z
t



Z
h
)
2


where
:


X
=
Special Features
(t =
typical consumer,
h =
hypothetical consumer)

Y
= Ease of Use (t =
typical consumer
h =
hypothetical consumer)

Z
= Easy to Learn (t =
typical consumer
h =
hypothetical consumer)

15

Example of Needs
-
Based Segmentation

Using Cluster Analysis


Market Segment


Computation

Similarity Score

(Lower = more
similar)

Fearful Typist

(3
-
8)
2

+ (8
-
4)
2

+ (9
-
7)
2

=

45

Power Users

(9
-
8)
2

+ (2
-
4)
2

+ (2
-
7)
2

=

30

Professional Specialist

(7
-
8)
2

+ (5
-
4)
2

+ (6
-
7)
2

=

3

To determine which segment this hypothetical customer most closely

resembles, a similarity score is computed for each segment.

This hypothetical customer is most like the “professional specialist.”

16

Markstrat

Segmentation

The
Markstrat

simulation contains two markets. The products sold to these

two markets can be thought of as consumer durable electronic goods


The first market, an existing market, is the
Sonite

market. The second market, a

new market, is the
Vodite

market.


The
Sonite

market contains five segments: Explorers, Shoppers, Professionals,

Hi Earners and Savers. What characterizes each
Sonite

segment?


Being a new market, the
Vodite

market has been segmented primarily by likelihood

of adopting the new product: Innovators, Early Adopters, Followers.

What characterizes each
Vodite

segment?

17

Markstrat

Segmentation & Positioning

The idea behind segmentation and positioning is the necessity to match

the attributes and benefits of a product offering with the wants and needs of

a market segment.


With this matching in mind, three questions need to be addressed:


1.

Where do we wish to be positioned?

2.

How do we design the product appropriate for this positioning?

3.

As the environment changes, how can we reposition our brands?

18

Markstrat

Segmentation & Positioning:

Perceptual Maps

One method that can be used to analyze the positioning of each

competitive brand in a product market is to use a perceptual map.

Here the dimension “performance” is actually a linear function of the
Sonite

product attributes processing power and display size. These factors may be

considered as the benefits consumers seek from the
Sonite

products they

purchase. Scales are arbitrarily set from
-
20 to +20.

19

Markstrat

Segmentation & Positioning:

Brand Maps

While perceptual maps show the ideal points of market segments and

actual brand perceptions of consumers based on the
benefits

consumers

desire from the
Sonite

products, a brand map shows the ideal points

of market segments and brand perceptions of consumers based on

actual product
attributes
.

(Note: Scale is 1 = low on attribute, 7 = high on attribute)

20

Markstrat

Segmentation & Positioning:

Perceptual or Brand Maps

Maps summarize much information about the relative position of the various

brands including:


1.

The degree of competition among the brands.

2.

Which brands are targeting which market segments.

3.

Which brands may cannibalize each other because they are


positioned too closely.

4.

May reveal holes in the market for new product introduction.


Notes about maps:



Brand maps are less accurate than perceptual maps because of the cruder

methodology used to generate the map, but they are much less expensive

to purchase.


For the
Vodite

market, only brand maps are available initially, until enough

brands are available for a MDS study to be carried out.

21

Hypothetical Visualization of the
Markstrat

Sonite

Market

Explorers

Shoppers

Professionals

High Earners

Savers

Company 1

Product 1

Company 1

Product 2

Company 2

Product 1

Company 2

Product 2

Company 3

Product 1

Company 3

Product 2

22

T
argeting Certain Market Segments

After the firm has segmented a market it needs to evaluate the

alternative market segments and determine the segment or

segments it wishes to target with its offerings.


Generally, the decision as to which segment(s) to target is based

on two main factors: the company’s resources and the attractiveness of

the segment(s).


Company resources
: firms should only enter segments where they have a

differential advantage over competitors in terms of company capabilities

(resources).


Segment attractiveness
: segment attractiveness can be assessed by

evaluating its size, growth, profitability, etc.


23

Selecting Market Segments

There are several ways that a firm may target market segments:

S1

S
2

S
3

B1

B2

B3

Single
-
segment

Concentration

S1

S
2

S
3

B
1

B2

B3

Selective

Specialization

S1

S
2

S
3

B
1

B2

B3

Product

Specialization

S1

S
2

S
3

B
1

B2

B3

Full Market

Coverage

24

Differentiated Marketing

or Multiple Target Market Approach

With differentiated marketing or the multiple target market approach, a firm

targets more than one segment and offers a unique product offering (brand) to

each segment it targets. This type of marketing usually generates more sales

for the firm but also increases the firm’s costs:


1.

Product modification costs via R&D go up.

2.

Loss of scale and experience advantages making many different brands.

3.

Must develop separate marketing plans for each market segment.

4.

Inventory costs will increase.

5.

Promotion costs increase as number of brand/segments increase.

Therefore, firms may wish to be somewhat conservative with respect to the

number of segments they target.

25

P
ositioning the Market Offering

After the firm has chosen the segments of the market it wishes to

target it must engage in competitive differentiation to obtain a competitive

advantage.


Differentiation is the act of designing a set of
meaningful differences
to distinguish

the company’s offering from competitors’ offerings and can take many forms:


1.

Product differentiation (product attributes)

2.

Services differentiation (services offered)

3.

Personnel differentiation (employees hired)

4.

Channel differentiation (coverage)

5.

Image differentiation (perceptions, promotion)


The firm must identify the target segment’s preferences for the levels of

the important differentiating variables (not necessarily all, since not all brand

differences are
meaningful

or worthwhile) and design/modify the offerings to

match those preferences.

26

P
ositioning the Market Offering

What offering differences are meaningful?



Differences that deliver a valued benefit to a large number of buyers.


The difference is not offered by a competitor.


Superior to other ways of obtaining the same benefit (easier).


Can’t be easily copied.


Buyer can afford the difference.


It will be profitable for the firm.


After the firm has discovered those meaningful differences it can now

promote those differences that appeal most to the market segment (just a few).


Positioning is the act of designing the company’s offering and image so that

they occupy a meaningful and distinct competitive position in the target

segments’ minds.

27

Single versus Double Benefit Positioning

Single benefit position relies on a unique selling proposition (USP) for each

brand. The firm selects one attribute for each brand and pushes that it

is the “number one” on that attribute.


Examples: Best quality, best service, lowest price, best value, safest, fastest,

most convenient, etc.


If two or more firms are claiming to be the best on the same attribute it

may be necessary to use double benefit positioning. Double benefit

positioning seeks to develop a special niche within a segment (Volvo is safe

and durable).


Some firms use triple benefit positioning (whiter teeth, fresher breath, cavity

protection) which may result in
countersegmentation
, attracting three

segments instead of one.

28

Optimal Brand Positioning:

General

From a positioning perspective, one may wish to position a brand so that it

can best satisfy the needs of one specific segment. The other possibility

is to position the brand so that it satisfies two or more segments. This second
option seems logical since reaching several segments could allow for higher
sales, greater economies of scale, more experience, and therefore lower costs.

1

2

x

Segment 1 ideal point

Segment 2 ideal point

Brand x position

Unfortunately, this strategy is not appropriate for the long term since a
competitor might decide to specialize in one segment and better satisfy
its needs and your firm would be stuck in the middle.


However, if neither segment 1 nor segment 2 were large enough to
allow for single
-
segment dominance by one brand, this strategy might
be feasible.

29

Optimal Brand Positioning:

Process

Optimal brand positioning can be thought of as a three step process:

1

Prediction of segment ideal points

2.

Forecasting brand demand


a.

Forecasting segment demand


b.

Forecasting brand market share

3.

Forecasting brand transfer cost



1.

Ideal points (the average needs of consumers in a segment)
gradually change over time. The marketing decisions of firms in the
industry affect the
evolution

of these ideal points (Examples?).



There’s also

one using MDS

30

Optimal Brand Positioning:

Process

2.

Forecasting brand demand:



Forecasting brand demand involves first forecasting segment sales and then
forecasting brand market share.


Forecasted brand demand = forecasted segment sales * forecasted brand market share


a.

Firms can obtain market forecasts by purchasing them from a marketing
research firm.

31

Optimal Brand Positioning:

Process

Forecasting brand market share:


In the long run, brand market share should be equal to brand
purchase intentions, which are related to brand awareness and brand
positioning.


b.

The firm can use information given in the consumer survey
research report to get purchase intentions (% of segment that intend
to purchase a brand).

32

Optimal Brand Positioning:

Process

Forecasting brand demand:


Now that we have forecasted segment sizes and forecasted brand
market share (purchase intentions) we can compute forecasted
brand demand:


Forecasted brand demand Firm M brand MOST:

Forecasted sales of brand MOST (K units)

Use a spreadsheet to make life easier.

33

Brand MOST Firm M

Explorers

Shoppers

Professionals

High Earners

Savers

Total

K Units

Size Next Period

125

856

298

247

845

Purchase Intentions

Forecasted Market Share

3%

3%

0%

0%

13%

K Units

Forecasted Sales per Segment

3.75

25.68

0

0

109.85

139.28

Optimal Brand Positioning:

Process

3.

Forecasting brand transfer cost.


Now the firm needs to consider the impact of production volume
on unit transfer costs.


The base cost given for an R&D project is the average cost for a
production batch of 100,000 units. This base cost is the cost of the
merchandise that is transferred from the production department to
the marketing department. It also follows gains in productivity
obtained from production experience (experience curve effects).


Furthermore, if several brands are marketed based on the same
product design, the experience effect is calculated based on the
cumulative production of all those brands.




34

Optimal Brand Positioning:

Process

In
Markstrat
, every time cumulative production of a particular
product design doubles, transfer costs from the production
department to the marketing department falls by a constant
percentage.


An 85% experience curve means that every time a product
design production volume doubles, the transfer cost to the
marketing department decreases by15%.


Can go to Reports>Brand Results> Contribution by Brand to
find the transfer cost.


If the firm knows the transfer cost at time 1 and also at time 2
then it can compute an estimate of the experience effect.

35

Optimal Brand Positioning:

Process

Estimating Experience Curve Effects

36

Allows the firm to estimate

the transfer cost in future periods

Period 0 Transfer Cost

Period 1 Transfer Cost

37

Optimal Brand Positioning:

Matching Product Attributes With Segment
Positions

In market targeting, the firm desires to go after relatively large market

segments that allow for costs to decline. As sales increase and costs decrease

profitability will rise.


In the semantic scales studies, brands are evaluated by consumers based on their
perceptions of the actual product attributes, whereas in the multidimensional
scaling studies dimensions are inferred based on attributes highly correlated with
the dimension.

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

38

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

As a result of the methods that are used to assess consumer perceptions of

a brand the firm must convert perceptions to physical brand attributes.

Perceptions of Battery as

measured by the market

research study

Level of Actual Product Attribute

39

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

In
Markstrat
, in addition to estimating the level of an attribute for a certain
market segment by converting perceptions to attributes, the firm can also
convert product attribute levels to consumer perceptions reported on the
perceptual scale. Kind of a double check.

40

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

A firm can also get the perceptions of market segments on the
perceptual map based on their setting of product attribute levels
(Analysis tools>product design tools


semantic scales>estimates of
physical characteristics and price for brand positioning).

In this figure, the number of features (8) is perceived to be 2.3 on the corresponding semantic
scale and brand map.

41

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

The following chart provides similar information to the semantic scale

chart (slide 39). However, the scale is from the multidimensional
scaling study. This scale is more precise since it is based on a
continuous scale of +/
-

20 instead of the 7 point scale (greater scale
range).

42

Note that this regression analysis explains 95% of the variation in the data.

43

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

The multidimensional scale analysis does not rate the desirability of
product attributes directly but indirectly. The previous slide compares
display size to performance. But an examination of the regression
equations show that display size is only one of two attributes entering into
consumers’ decisions about a product’s performance.

The other issue with MDS is the lack of available information for

new product/markets.

44

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

As previously discussed, a firm can also use either a brand map or

a perceptual map to position brands. Here, one might assume a linear
relationship between the 1


7 semantic scale and the actual product
attribute levels.

45

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

In this brand map, Professionals’ ideal point seems to be about 6.4 for power and

5.5 for price. One might use
linear interpolation
to convert these semantic

scale points into product attribute levels.

46

Optimal Brand Positioning:

Matching Product Attributes With Segment Positions

Note that 1 is the low point on the semantic scale and 7 is high. In the
Sonite

market the low power option is 5 Gigaflops and the high power
point is 100 Gigaflops. Assuming the low point for price is $200 and the
high price is $550 and a linear relationship between price and thee 1
-
7
semantic scale for price we can determine the ideal level of these two
product attributes for Professionals:


For power we have:

Low end
-


y = mx + b, 5 GFLOPS = m (1) + b {equation 1}

High end



y = mx + b, 100 GFLOPS = m (7) + b {equation 2}


Two equations, two unknowns:

From 1:

b = 5GFLOPS


m


Substitute into 2:

100GFLOPS = 7m + 5GFLOPS


m

95GFLOPS = 6m

m = 15.83GFLOPS, therefore b =
-
10.83


So, if the ideal point for power for the Buffs segment is 6.4 we can substitute:


Power = 15.83 (6.4)
-

10.83

Power = 90.48 Watts


The same type of computation can be done for price.

47

Optimal Brand Positioning:

Brand Repositioning

After a brand has been introduced to the market consumers form

impressions about the brand. These impressions are what we
measure and plot on the brand maps or perceptual maps.


As time goes on, competitive forces and consumer education cause
brand impressions to change or evolve, necessitating a brand
repositioning strategy.


In
Markstrat
, brand repositioning can be accomplished via advertising
and/or by changing product attribute levels through R&D.


If repositioning is to occur via advertising the following decisions
must be made:


1.

Choose the market segment for repositioning.

2.

Set the perceptual objectives for the brand.

3.

Allocate the advertising media budget for the brand.

4.

Allocate an advertising research budget.

48

Optimal Brand Positioning:

Brand Repositioning

(Decision Forms>Marketing Mix)

Simply indicating the target segment (100% of the budget for Pros) will not

be sufficient to reposition a brand. Segment selection only affects the media
vehicles employed, not the messages. Decisions entered in the Production,
Pricing and Advertising sections affect the message.

49

Optimal Brand Positioning:

Brand Repositioning

Brands might not need to be positioned using two dimensions, if the
perceptions on one dimension correspond to what consumers want
there is no reason to employ advertising to change that perceptual value.

If repositioning
on only one
dimension,
choose none for
dimension 2.

50

Optimal Brand Positioning:

Brand Repositioning

If the brand’s position is satisfactory on both dimensions and the
advertising objective is only to improve brand awareness with
persuasive arguments reinforcing current perceptions, choose the no
objectives option.

51

Optimal Brand Positioning:

Brand Repositioning

The advertising budget should reflect the promotional objectives. If the
product is being modified with adjusted physical characteristics a larger
advertising budget will be required. Also, a larger budget will be required
if setting two rather than one advertising objectives. Finally, the
advertising research budget devoted to these communication objectives
needs to be higher (e.g., 10% versus 5% of the advertising budget).

52

Optimal Brand Positioning:

Concluding Comments

Thee ability to reposition brands via advertising is limited by the actual

physical characteristics of the product. At some point it may become
necessary to reposition the brand by changing the brand’s physical
characteristics, requiring successful completion of an R&D project.


Also, brands that consumers are extremely familiar with will be difficult
to reposition.

53

Optimal Brand Positioning:

Concluding Comments

Perceptual maps are important positioning and repositioning tools.
However, the effectiveness of positioning and repositioning is subject to
brand awareness. Positioning a brand close to a segment ideal point will
be ineffective if brand awareness is low. Conversely, high brand
awareness can make brand repositioning more difficult.


Each of the 5 segments in the
Sonite

market represent different levels
of sales and different stages of development. Their needs evolve over
time as do their ideal points.