Week 4: STDP Segmentation, Target, Differentiation and Promotion

1. Does segmentation Facilitate consumer obsession?

Let me start by explaining why consumer obsession is important. I stumbled across a reading from a book "Customer Obsession" by Abaete de Azevedo & Ricardo Pomeranz. One of the statements from the books states that "Consumer obsession is definitive roadmap of all business that want to achieve maximum return for their market investments." Amazon has already proved this and their acquisition of Zappos is primarily based on the fact that both companies values customer satisfaction and incorporate this value in their organization strategy. It is the customer obsession that is driving Amazon to plan on how to use drones (auto copters) for order delivery. The purpose is to simply reduce the order delivery time to 30 minutes or less. They have researched that 86% of their orders weigh 5 pounds of less and can potentially be delivered using the drones or auto copters. Though the technology to do this is 4 to 5 years away and there are FAA restrictions to be resolved, this has not stopped Amazon from planning as this adds a lot of value to the customer.

How segmentation facilitates consumer obsession? In order to better serve the customer, it is essential for an organization to know who their customers are or going to be. This is where segmentation comes into play. This allows you to understand the cluster, a sizable group, of consumer in the market with homogeneous purchasing behavior and needs. Segmentation allows an organization to focus on a particular group of consumer, provides promising opportunities and opportunity to enter into a market with competitive offering.

2. When a firm chooses a particular segment for targeting what are its primary considerations?

While assessing a marketing segment following factors needs to be considered

1. Market Factors
1. Is the segment representative of observable variable like age, gender, life cycle, lifestyle, income, price sensitivity etc.
2. Is it predictable and big enough for sustainable profit?
3. What is the growth rate of the segment? Does it promise future growth?
4. What is the cyclicality of the demand?
2. Competitive Factors
1. Who is the competitor? What are their product offerings? Are there any threats of price war?
2. How is your product different from the competitor?
3. Economical & Technological Factors
1. Are there any barriers to entry or exit? The barriers to entry can include government regulations, inelastic demand, customer loyalty etc. The barrier to exit can include sunk costs.
2. How much investment is required?
3. What is the profit margin?
4. Business & Environmental Factors
1. What is the impact economic fluctuations?
2. What is the impact of political legal and government regulations? 

3. What is positioning?  Where does a firm's position reside. 

Positioning is a strategy to differentiate company's brand on the basis of attributes that customers find meaningful. Meaningful differentiation can be based on several attributes like physical attributes for e.g. product features and service features or pricing attributes such as bargain pricing. 

Positioning should be strategized to clearly articulate who the target customers are, what needs the product fills and why your product is the best option to satisfy those needs. Additionally,  marketing programs should be designed to support and reinforce the differentiation of a product in order to effectively position a product.

4. Example of companies within same space but different customer segment focus
If you look at food service industry. There are 2 largest segments - full service and fast food segments. Companies like McDonalds, Burger king, Denny's, Wendy's, Arbys and subway have captured the fast food segment.
Within the fast food segment, McDonalds has put more focus on children, youth and young urban family. The Happy Meal is a combination meal that is suitable for kids and incudes toys that attracts children to McDonalds. McDonalds has strategically added play area for kids in selected places to attract families with kids.

Subway on the other hand targets customer within the fast food segment who are health conscious. Subway's marketing strategy is to address health, include fresh ingredients, and low-calorie custom made sandwiches. Subway promotes its products that is directed towards healthy living by sponsoring in events such as Heart Association heart Walks and local triathlon events.