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Strategic Marketing
052 430
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Michael Cooke
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Strategic Market Management
Global Perspectives
David A. Aaker and Damien McLoughlin
ISBN: 978-0-470-68975-2
www.wileyeurope.com/college/aaker
© Copyright 2010 John Wiley & Sons Ltd
2
Chapter Two
External and Customer Analysis
© Copyright 2010 John Wiley & Sons Ltd
3
“The purpose of an enterprise is to create and
keep a customer.”
Theodore Levitt
“You can’t just ask customers what they want and
then try to give that to them. By the time you get it
built, they’ll want something new.”
Steve Jobs
“Without a specific reason for the consumer to
behave, without a reward or benefit, the
overwhelmed consumer will refuse.”
Seth Godin
External Analysis
 Analysis of factors external to a business that affect
strategy
 Volume of external analysis material can be unlimited
– Avoidance of useless material requires discipline
– Why do we need to know this?
– Choosing what is relevant is the most difficult task for any analyst
 Need for analysis to have direction and purpose relevant to
strategy
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–
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Existing business strategy
New business areas
Customer value propositions
Asset/competencies creation, enhancement, maintenance
Functional area strategies (distribution, brand-building, etc.)
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The Role of External Analysis
Strategic Decisions
• Where to compete
• How to compete
External
Analysis
Identification
Analysis
• Trends/future events
• Threats/opportunities
• Information-need areas
• Strategic uncertainties *
• Scenario analysis
Figure 3.1
Strategic Uncertainties
Strategic Uncertainties
 Will a major firm enter?
 Will a tofu-based dessert
product be accepted?
 Will a technology be
replaced?
 Will the Euro strengthen
against other currencies?
 Will computer-based
operations be feasible with
current technology?
 How sensitive is the market
to price?
Strategic Decisions
 Investment in a product market
 Investment in a tofu-based product
 Investment in a technology
 Commitment to off-shore
manufacturing
 Investment in a new system
 A strategy of maintaining price parity
Strategic Uncertainties
• Performance improvements?
What will the
future demand?
• Competitive technological
developments?
• Financial capacity of health care
industry?
Practical Difficulties
 Successful businesses know their customers
– Revenues generated by customer
– Costs associated with each customer
• Direct product costs
• Customer service and acquisition costs
• Indirect costs
– Customer profitability
– See http://home.kku.ac.th/michco/Strategic_Marketing/Are Your Biggest Customers
Your Biggest Losers.docx
 Many organizations ‘fly blind’
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–
–
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Revenues may be in different parts of the organization
Costs must be ‘transfer priced’ – a difficult task
Organizational culture must support analytical approach
Major IT investment
Determining Customer Profit
Cost
Process
A
Revenue
Product
1
Total
Customer
Revenue
Cost
Process
B
Total
Customer
Cost
Revenue
Product
2
Direct
Product
Costs
Total Revenue – Total Cost = Customer Profit
12
Customer Analysis
 Segmentation
– Who are the biggest customers? The most profitable?
The most attractive potential customers? Do the
customers fall into any logical groups based on needs,
motivations, or characteristics?
– How could the market be segmented into groups that
would require a unique business strategy?
Figure 3.2
Customer Analysis
 Customer Motivations
– What elements of the product/service do customers value most?
– What are the customers’ objectives? What are they really buying?
– How do segments differ in their motivation priorities?
– What changes are occurring in customer motivation? In customer
priorities?
Figure 3.2
Customer Analysis
 Unmet Needs
– Why are some customers dissatisfied? Why are some changing brands or
suppliers?
– What are the severity and incidence of consumer problems?
– What are the unmet needs that customers can identify? Are there some of
which consumers are unaware?
– Do these unmet needs represent leverage points for competitors?
Figure 3.2
An 1861 Map
Lincoln would look at the map and send his armies to free blacks in some of the highest density areas in
order to destabilize Southern order. Segmenting and then attacking the opponent’s weak points?
Communicating Complexity
•
•
Though many Americans knew that dependence on slave labor varied throughout the
South, these maps uniquely captured the complexity of the institution and struck a
chord with a public hungry for information about the rebellion.
The map uses what was then a new technique in statistical cartography: Each county
not only displays its slave population numerically, but is shaded (the darker the shading,
the higher the number of slaves) to visualize the concentration of slavery across the
region.
Conversely, the map illustrated the degree to which entire regions—like eastern
Tennessee and western Virginia—were virtually devoid of slavery, and thus potential
sources of resistance to secession.
The map quickly caught the public’s attention, and was reproduced throughout the war.
The map gave a clear picture of what the Union was up against, and allowed
Northerners to follow the progress of the war and the liberation of slave populations.
Though the president had abundant maps at his disposal, only this one allowed him to
focus on the Confederacy’s greatest asset: its labor system. After January 1, 1863—
when the Emancipation Proclamation became law—the president could use the map to
follow Union troops as they liberated slaves and destabilized the rebellion.
Source: http://opinionator.blogs.nytimes.com/2010/12/09/visualizing-slavery/
•
This map was used in several ways
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•
•
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Military strategy targeted areas with large numbers of slaves for disruption
Political strategy targeted areas with low numbers of slaves with enticements to break from the
Confederacy
Segmentation
• Variation in customer needs is the primary motive
for market segmentation.
• Most companies will identify and target the most
attractive market segments that they can
effectively serve.
• In global marketing, market segmentation
becomes especially critical because of wide
divergence in cross-border consumer needs and
lifestyles.
• Once management has chosen its target
segments, management needs to determine a
competitive positioning strategy for its products.
•18
Reasons for International Market Segmentation
•
Country Screening (consideration of a market is based on initial screening criteria)
•
Global Market Research
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–
•
Market Entry Decisions
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–
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Where will marketing efforts have greatest impact?
Target market segments might change due to consumer preferences or population changes
How the products or service is positioned will follow the opportunity
Resource Allocation
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Product launches based on shared relevant characteristics across countries
Country differences on other dimensions can hinder success
Positioning Strategy (influencing customer perception of the product relative to competitors)
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Cluster countries across relevant characteristics
Focus research efforts on a representative sample
Market share clusters (increase penetration)
Consumption clusters (developing the market)
Marketing Mix Policy
– Countries in same segment might have similar mix strategy (design, pricing, promotion,
distribution)
– Similarities on one dimension might be offset by differences on another (such as price
sensitivity)
Requirements for International Market
Segmentation
– Identifiable
• Should be easy to define and measure
• Value or lifestyle measures typically difficult to gauge
– Sizable
• Segments should be large enough to be worth pursuing
• Small segments aggregated across countries might work
– Accessible
• Segments should be easy to reach
• Infrastructure differences across countries
– Stable target market behavior and composition
– Responsive – segments have unique responses
– Actionable – the required marketing mix is consistent
with the company goals and competencies
•Chapter 7
•Adapted from 2009 John Wiley & Sons,
Inc.
•20
International Market Segmentation Approaches
– Country-as-segments or aggregate segmentation
(Exhibits 7-2 & 7-3.)
• Geographic single dimension or several dimensions
• Marketing irrelevance of many country boundaries
• Difficulty of determining which variables to use for geo
segments
– Disaggregate international consumer segmentation
• Consumer segments defined by similarities along chosen
characteristics
• Consumer bases might be geographically disbursed –
logistical issues
– Two-stage international segmentation
• First aggregate countries (macro level) screens out countries
• Second segment consumers within the country cluster
(micro)
• Market oriented and accessible
•Copyright (c) 2009 John Wiley & Sons,
Inc.
•21
Exhibit 7-2: Nestlé’s Geographic
Segmentation of the Americas
•Chapter 7
•Copyright (c) 2009 John Wiley & Sons,
Inc.
•22
Exhibit 7-3: Macro-Level Country Characteristics
•Chapter 7
•Copyright (c) 2007 John Wiley & Sons,
Inc.
•23

Information filtering (sensory filtering)
◦ Occurs among even lowest organisms (react to heat, light.
Other aspects of environment ignored by primitive senses)
◦ Highest life forms still limited in gathering and processing
information from environment
 We learn to filter information irrelevant to a situation
 Often the most highly educated among us filter most
◦ We fail to see/hear or recall much of what is available to us




Under the right conditions (context) we might recall
what we otherwise would not
Our filtering and recall changes through life and with
circumstances
Marketers try to determine which audiences might be
receptive to the product message, and how to enable
recall
Distances between high SES among countries might
be less than between SESs within a country (life
circumstances and education factors)
International Segmentation Scenarios
•
Universal or global segments (go beyond boundaries)
– Customers belonging to universal segments have common needs
– Could be a universal niche (example: global elite, business travelers)
– Common customer needs higher in some product categories (high-tech or travel related)
•
Regional segments
– Differentiated versus undifferentiated strategies apply to global segments as well
– Differentiated strategy tailors marketing to local market conditions
– An undifferentiated strategy is often followed by some high-tech companies – uniform
worldwide marketing, scale economies
•
Unique (diverse) segments
– Substantial differences in cross country customer preferences
– Localized marketing mix programs
– Food products may have country specific segments
• Degrees of segmentation often follow degrees of market
development (emerging markets usually have a simple consumer
market structure – high price or low price only)
•25
Demographics Segmentation
• Easy to measure
• Fairly accurate and easy to obtain
• The elderly are an often overlooked segment
– Unique needs
– Self perceptions (active, not old)
• Global middle class family is highly sought
– Definition is tricky
• HH income figures ignore purchasing power differences
• Vast differences between countries in how income is spent
– Chinese spend less than 5% on rent, transport, health
– US consumers spend 50%
– Income distinctions ignore education and values
Economic Forces
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Demographic variables are a factor in country wealth
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Working age population relative to non-working
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China and Thailand will soon have shrinking % working age
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Often overlooked implications of large % population = elderly
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Socioeconomic Variables
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Per Capita income
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Issues in using per capita income as an indicator:
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Transactions are valued in an international currency
(monetization of transactions)
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Official exchange rates seldom reveal true buying power within a
country
» Services are provided in-country using local currency
» Goods not traded across borders (housing, etc)
» Use Purchasing Power Parity to estimate buying power
–
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Gray and Black Market sectors of the economy (cash or barter)
Income inequality – Gini index
•
•
•
Lower number means more income equality
Scandinavian countries have least inequality
Thailand, China, USA relatively unequal (higher index)
•27
World Income Inequality
World Gini Compared to USA
•The Atlantic http://cdn.theatlantic.com/static/mt/assets/international/gini%20map%20twotonefull%20pos.jpg
Income Inequality in Selected Countries
 South Africa (2)





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65
(2005)
59.3 (1994)
Thailand (12) 53.6 (2009)
42
(2002)
China
(27) 48
(2009)
41.5 (2007)
USA
(42) 45
(2007)
40.8 (1997)
Germany (124) 27
(2006)
30
(1994)
Sweden
(136) 23
(2005)
25
(1992)
Implication: Low per capita GNP can mask affluent areas/segments.
•https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html
Thailand Statistics
• Low population growth rate, falling rate by 2050
– 69MM 2010
– 73MM 2030
– 68MM 2060
world 6.9BB
world 8.3BB
world 9.6BB
Thailand = 1.00% of world
Thailand = 0.88% of world
Thailand = 0.71% of world
• Low birth rate
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–
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12.8/1,000 is similar to China
20.1/1,000 is replacement rate
Declining family size. Declining % under 15 years of age.
More women delay marriage or never marry
• Low urbanization, high rate of change
– Thailand 34% urban, change 1.8% per year
– China 47% urban, change 2.3% per year
– USA 82% urban, change 1.2% per year
• Longer lives
– Increasing number of retired (age 65+ =11.4% in 2020)
– Decreasing number of working age (similar to China)
• Population forecast: http://populationpyramid.net/Thailand/2050/
•http://link.springer.com/article/10.1007%2FBF03031794?LI=true#page-4
Population Pyramids
Population Pyramid Thailand
Population Pyramid China
Population Pyramid Philippines
•2008 population 96MM 2050 population 172MM
Population Pyramid Malaysia
•2008 population 25MM
2050 population 43MM
Population Pyramid Cambodia
•2008 population 14MM 2050 population 24MM
Population Pyramid Japan
•2008 population 127MM
2050 population 94MM
Ethiopia
•2008 population 83MM
2050 population 278MM
Implications of Demographic Shift
• Smaller households require different housing
• Families with fewer children spend more/child
• With fewer people of working age
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Cost of labor will rise
Low skill jobs will go to countries with younger populations
Need to move to higher value added (skills)
Fewer working age offset in urban areas by rural migration
• More retirees and elderly – a unique market
• Japanese model
– Higher value added industries
– Investment abroad
• Pressures for immigration from labor surplus countries
Bases for Country Segmentation
Product Related (Exhibit 7-7)
– Attitudes toward product attributes
• Country of origin
• Status related (microwaves in living room)
– Usage rate (product consumption per capita or
per HH)
– Product penetration
• Percentage of target market that uses the product
• An often used measure of new sales potential
– Consumption infrastructure (electricity, etc.)
•42
Exhibit 7-7: Benefit Segments of Toothpaste
Market in the U.S.A., China, and Mexico
•Chapter 7
•Copyright (c) 2007 John Wiley & Sons,
Inc.
•43
Segmentation
 Segmentation is the identification of customer groups that
respond differently from other customer groups
 Viable segments are meaningful, enduring, and large enough
to generate return on investment
 How should segments be defined?
– Benefit Segmentation – what benefits are sought by consumers?
– Price Sensitivity
– Loyalty – total profits over life of customer, try to increase intensity
– Applications – how is the product used?
– Multiple Segments versus Focus Strategy – Campbell Soup or Wal-Mart?
Examples of Approaches to
Defining Segments
 Customer Characteristics
– Geographic
– Type of organization
– Size of firm
– Lifestyle
– Demographics- powerful and predictable
– Occupation
Figure 3.3
The Loyalty Matrix: Priorities
Customer
Low
Loyalty
Moderate
Loyalty
Medium
High
Loyal
Highest
(switch for price)
Non-customer
Low to
Medium
High
Zero
(high cost of
attracting)
(switch for price)
Figure 2.4
Figure 3.4
Customer Motivation Analysis
Identify
Motivations
Customer Interviews
Group and
Structure
Motivations
Assess
Motivation
Importance
Figure 2.6
Assign Strategic
Roles to Motivations
Figure 3.6
The Customer as Active Partner
 Such as: Patients in control of medical issues, access to
information and other customers via internet (rather than
passive targets)
 Encourage Active Dialogue of Equals
 Mobilize Customer Communities, perhaps via internet
 Manage Customer Diversity (of sophistication) with most
sophisticated as most active partners
 Co-creating Personalized Experiences
 Beware of information overload
Information Overload?
 For many forms of marketing, the higher the
likelihood of getting a sale, the higher the cost per
target consumer.
 Before internet, mailing lists were sold with a price per
name. Marketers considered cost of sending mail
 The more specific the segment (higher likelihood of
getting a response) the higher the unit cost
 How do Google ads fit this model?
 How does worldwide spam fit into this economic model?
 How does this rule change when there is no cost to
deliver a message? What sort of filtering mechanisms
would we have?
Determining Unmet Needs
Ethnographic Research
 Directly observes customers in varying contexts
 What and why customers do things
 Deeper level of understanding of needs and motivations
 Good at identifying breakthrough innovations
 Typically customers think of current offerings
 Henry Ford’s faster horses
 Observations can lead to insights
 Particularly useful in going beyond cultural boundaries
 Can be used to improve existing products
 Business insiders often can’t see past the existing
structure (HP executives said PCs were a commodity)
•50
Key Concepts

External analysis should influence strategy by identifying opportunities,
threats, trends, and strategic uncertainties. The ultimate goal is to improve
strategic choices – decisions as to where and how to compete.

Segmentation (identifying customer groups that can support different
competitive strategies) can be based on a variety of customer characteristics,
such as benefits sought, customer loyalty, and applications.

Customer motivation analysis can provide insights into what assets and
competencies are needed to compete, as well as indicate possible Strategic
Competitive Advantages.

Unmet needs that represent opportunities (or threats) can be identified by
projecting technologies, by accessing lead users, by ethnographic research, and
by interacting with customers.
•Social, Cultural, Demographic, and
Natural Environmental Forces
•Ch 3 -52
•Major Impact –
•Products
•Services
•Markets
•Customers
•Copyright © 2011 Pearson Education, Inc.
•Publishing as Prentice Hall