Saturday, January 27, 2007

Segmentation, Differentiation and Positioning (Part I of a Series)

Today I am beginning a new series of articles on segmentation, differentiation and positioning (SD&P). SD&P form the foundations of any successful marketing campaign, program, strategy and/or plan - and therefore a basic understanding of these concepts is essential. The first of this multi-part series is on the topic of segmentation.

Segmentation and the Selection of Target Markets

Few are the products that are relevant to the entire world. Familiar examples include products such as Coca Cola, McDonalds' hamburgers, and Tylenol. Most marketers, therefore, have to think through the process of market segmentation - in reality, even marketers at a company such as Coca Cola need to segment their market in order to optimize the effectiveness of their efforts; marketing Coca Cola to teenagers is very different from marketing the soft drink to a mature audience.

I like to differentiate between two different types of segmentation. One is the top-down method - in technology, this is also known as the "Ivory Tower" method. When practicing top-down segmentation, a marketer generally has a product in mind - it may be an existing product, or just a concept for a product - and his task is to fit the product to a segment of the market. It is exemplified by companies such as SAP (the giant German software company) - they gather a bunch of very smart people, develop a software product that they believe will allow certain segments of the market to manage their businesses better, and then try to sell the product into those segments. While this is the classical marketing approach, it is reminiscent of the egotistical approach to marketing - it is driven by a sales person's methodology - "Who can I sell this to?". Such a segmentation analysis always begins with the mass market and proceeds in a top-down fashion. The marketer, who is familiar with the product or service's attributes, tries to find the best mapping between these attributes and the requirements or desires of a specific segment of the market. This segment is most likely to purchase your product, and you should maximize the effectiveness of your marketing program by directing most (or all) of your resources towards this segment.

The second type of segmentation is the bottom-up method. This method is the way many entrepreneurs go about their business. Typically, the entrepreneur becomes familiar with the needs of a specific market segment - for example, small and medium medical industry distributors. He then applies his expertise (which is, hopefully, somewhat relevant!! :-) to creating a solution for that market segment based on the real needs of his potential customers. Among small and medium medical supply distributors, for example, the management of the supply chain is a complicated and inefficient process - it could be significantly improved by facilitating supply chain processes through the use of automated software systems. The entrepreneur would then develop a solution while working closely with his potential future customers to ensure a good fit between the attributes and benefits of his product - and his segment's needs. This is how we went about developing our private business network systems at Veranto, for example.

Often, an entrepreneur is not familiar with a specific segment, but will search for a segment that has a set of unmet needs to which he believes he can apply his expertise.

Top-down segmentation, then, typically begins with a product or service and seeks to find the best set of potential customers to which that product or service may be sold. Bottom-up segmentation begins with the selection of a segment that has some unmet need, then proceeds through the product development process in an empathetic fashion.

The segmentation process itself is typically either purely quantitative, or it can be a combination of quantitative and qualitative processes. As a reminder, quantitative data is of a numerical character - e.g. a person's level of income, the number of times a month he does something, etc. Qualitative data is typically more descriptive - a person's favorite color, what he likes about a product, or how he cooks his eggs. Note that almost any qualitative data can be transformed into a quantitative form for the purpose of analysis. You are surely familiar with questions that ask you how much you like a product on a scale of X to Y (called a Likert scale, btw - more on that in a future note on market research). But more complex attributes can be converted to numbers by various systems of mapping and indexing.

A quantitative process can vary from simple data collection techniques in tandem with descriptive characteristic analysis (min/max, average, standard deviation etc.) and bar graphs, to complex statistical methods such as factor and cluster analysis, which are outside the scope of this course and are examined in more advanced graduate marketing classes (if you are interested in exploring further I can point you to some good resources). More typically, however, one will find that the segmentation process in most organizations is based on a methodological research process that combines both quantitative and qualitative elements. A marketer may begin with the collection of data along some dimension (for example, demographic or geographic) and apply simple statistical techniques to divide the sample into segments (e.g. by age group or by region). The marketer will then proceed to map various quantitative and qualitative characteristics to the various segments. Next, he or she will attempt to find the best fit between the characteristics of the various segments and the attributes of the target product or service. The segment - or segments - that provide the best fit are those selected as targets. From here, the marketer will proceed with more in-depth primary research, target markets, etc.

In my next note I will tackle the challenge of differentiation.

Thursday, January 25, 2007

No Satisfaction at Toyota

Excellent Fast Company article about continuous process improvement at Toyota's Georgetown plant.

Here's a big insight - the Big 3 are not losing the car wars to foreign made cars - fully 60% of Toyotas sold in the US are MADE in the US!!

There's a lot to learn from Toyota's manufacturing processes, and especially from the way they constantly pursue small incremental changes at every level of production.

Wednesday, January 24, 2007

Egotistic vs. Empathetic Marketing

There are two major approaches to marketing.

One is egotistic, while the other is empathetic.

The egotistic approach is focused mostly on selling – I have a product, and I’m going to convince you that you need it; I may not care whether you really need it or not, but by God I’m going to sell it to you – and I’m going to sell it to you at a profit.

The empathetic approach is focused on classic marketing concepts – understand the needs of the customer, and deliver a product that fits those needs along the four dimensions of the "4 P's" (Product, Price, Promotions, Place).

As a marketer, if you’ve properly completed your prework (market research and product development), taken the necessary steps to make the customer aware of your product (promotions and communications), and placed and priced your product in a way that enables him to purchase it with reasonable convenience (pricing and distribution) – there will be little need for selling; instead, there’ll be buying.

This delineation can be compared to the push/pull marketing paradigm; egotistic is mostly push, while empathetic is mostly pull. Egotistic marketing may be effective over the short term, but those of you hoping to capitalize on the success of your business in the long term will be better off adopting an empathetic approach.


Tuesday, January 23, 2007

New Search Resources

Came across some new (to me) search resources that I wanted to share with you all -

Search Engine Journal

Search Engine Radio

John Battelle's Searchblog


Wednesday, January 17, 2007

New Search Efforts from the "Big" Guys

A great little article in WSJ ("In Search of...Better Ways to Search," Vascellaro, Jan 17 2007) has turned me on to some intriguing new search efforts from the "masters" of search at Google, Yahoo, and Ask!

Google's new effort is called searchmash - the key here seems to be integrated search, you get everything on a single page including the usual text results plus images, videos, blog results, and most are viewable right from the search page.

Yahoo is using recently (ok, not so...) acquired AlltheWeb and AltaVista to test out various search technologies it probably does not want to run the risk of putting out on the major branded search page just yet. Both include interesting audio search capabilities that are worth playing around with.

The former "Ask Jeeves," now just Ask! is fooling around with some new technologies as well on Ask X. Is "Ask" a strange word, or is it just me?

Jimbo Wales, one of the folks behind Wikipedia, has embarked on, which is touted as a "wiki inspired search engine" (...I'm not sure I know what that means yet...) - this is a freshman effort that you can join and help create, in an open source fashion.

Leave it to Microshloft to do something strange - If you can't join them, beat them?? Take a gander at Ms. Dewey...uh, Bill, this baby ain't going nowhere fast...

With a WSJ Online subscription, you can read the whole thing here.

Rage on.

Monday, January 15, 2007

The Four Phases of Marketing

I like to divide the art and science of marketing into four major phases -
1) Planning
2) Execution
3) Measurement
4) Control

1) Planning During the planning phase, marketers conduct research, immerse themselves in the market and the product, and prepare for the product launch. This phase includes such activities as test markets, production of collateral and promotional materials, and design of the product and requisite manufacturing facilities or processes as necessary. The culmination of this phase from the marketer's perspective is with the production of a full-blown marketing plan.

2) Execution Following the planning phase, marketers lead their company in executing the plan, launching the product to market and putting all of the elements of the plan into action.

3) Measurement Once the product is on the market, marketers collect data, conduct primary research (e.g. surveys and focus groups) and try to assess the success of their product launch using a variety of methodologies.

4) Control Finally, during the control phase marketers fine-tune their strategy, manipulating pricing, packaging and distribution, for example, or launching new promotional campaigns. The control phase may also include product repositioning, if the product's initial positioning is found to be ineffective or unsatisfactory.

( be continued...)

Sunday, January 7, 2007

Search Strategies for the Web and Databases - Part IV

A Brief Introduction to Boolean Search Strategies

The following tips should help improve your search capabilities several-fold, and you can use them on almost all Web and database search engines (e.g. databases available through academic and public libraries such as Proquest and ABI/Inform etc. - typically you can gain access to some of these types of resources from your home PC through a simple Internet connection) - the good news, however, is that if an engine doesn't support these options - it'll just ignore them.

1) Use quotes to specify terms - if you want to search for material about online marketing, for example, search for
"online marketing" (with the quotes)
rather than just -
online marketing (note - without the quotes).

The quotes will guarantee that the engine only returns pages where "online marketing" appears as a phrase, rather than returning every page on the Web or in the database where both "online" and "marketing" happen to appear.

2) Use "And" to further focus your search - for example, say you were only interested in "online marketing" of books - your search should look as follows -

"online marketing" and books

This kind of search will only return sites that include the term "online marketing" and also the word "books"

3) Use "Or" if you're trying to limit a search, as above, but would like to try a few different options - for example, perhaps you're searching for material on wine but don't care if it's red or white - try searching on the following combination -

"white wine" or "red wine"

This type of a search will return any page where either "white wine" or "red wine" can be found

4) Use parentheses to organize and combine searches. Let's return to the "online marketing" searches - say you're interested in online marketing of various types of media. Media can include books, CDs, videos and DVDs (among many other formats). You could structure a search as follows -

"online marketing" and (books or CDs or videos or DVDs)

The parentheses help ensure that your search is executed in the order you would like it to be - just like one would use parentheses in a mathematical calculation if you wanted to ensure that addition is completed prior to multiplication etc.

5) Use a negative sign "-" to exclude sites that include specific words or phrases - suppose for the above search you notice that most of the results in the first few pages are coming from McGraw Hill's site, but you want to get to results from other sites - run the search again, as follows -

"online marketing" and (books or CDs or videos or DVDs)

...and - voila - you should only receive search results that exclude pages from McGraw Hill's site.

In summary...

Search strategies can get a lot more intricate and complicated than the little that we've covered here. But - you've got to start somewhere. Typically successful searches will require some degree of iteration. Stay tuned to this space for more elaborate advice about successful search in the near future - and please don't hesitate to ask for clarifications, and to offer your own hints and tips, by responding to this post.

Friday, January 5, 2007

Search Strategies for the Web and Databases - Part III

Keeping on top of new developments in the search space

Basically, one Web site, and one newsletter, started by Danny Sullivan, the guru of search, more than ten years ago - should suffice to keep you on top of the search space. The newsletter link will lead you to a page where you can sign up for Search Engine Watch's paid service - or just for the free service. The value-add vs. the free version is not incredibly substantial for those of you not following the space profesionally; analysts etc. will definitely want to for-fee newsletter. There is also a Search Engine Watch blog, of course...

Danny himself has gone on to start Search Engine Land - destined to be a terrific search resource as well, I'm sure. I've been following Danny since back when I was Director of Marketing for Data Research Associates (DRA, acquired by SIRSI spring 2001 - now SirsiDynix), so I should know :-)

Google has its own blog where you can check out what the search behemoth is up to. If you look down the rightside column of GoogleBlog you will see a long list of other Google blogs, as well as a list of blogs and newsletters the Google team finds to be useful.

Google Labs is another wonderful source for new and exciting developments - check it out to see what may become actual product a few months or years hence.

Not to be outdone, Yahoo! has developed its own labs site.

If you would like to recommend any other great search sites, write me! (by posting a comment to this note)