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Gary Lyon explores the role and impact of three elements of marketing planning that drive business success: Segmentation, Targeting, and Positioning.
NASCAR followers will likely recognize the famous red oval logo of STP, originally an acronym for “scientifically treated petroleum”. As a gasoline additive, STP is designed to prolong engine life and improve performance. Could “STP” also be a proven boost to healthcare marketing effectiveness? This article briefly explores the role and impact of three elements - I would argue the most important elements - of marketing planning that drive business success: Segmentation, Targeting and Positioning.
Segmentation is the process of dividing large, diverse markets into smaller, more homogenous sub-groups on the basis of one or more differentiating criteria. Traditionally, these criteria have included demographic or psychographic (lifestyle) factors but attitudinal and behavioural factors are equally important.
I recall working on an OTC heartburn remedy where a clear “Pareto” (80:20) effect existed: almost 70% of total market consumption was generated by less than a third of all users. These “heavy users” had their own unique profile and characteristics that would have been difficult to understand, let alone apply if we had tried to target all users. More importantly, heavy users were uniquely appreciative of the features and benefits of this product and willing to pay a premium price which casual users were unwilling to do so. How far can the segmentation process go? A four-step segmentation “test” that Dr. Brian Smith of Pragmedic once shared with my students at Regents Business School in London can be summarized as:
Homogeneity – does the segment, as a whole, share meaningful characteristics?
Distinctiveness – is the segment distinctly different from other segments?
Accessible – can we target consumers within the segment effectively and efficiently?
Valuable – can we build a sustainable, profitable business by targeting this segment? Macro/micro-economic factors like the regulatory climate, underlying market growth, and competitive factors would also come into play.
Segmentation usually involves the “painful’ decision of saying “no” to a majority of possible customers in favour of the few, highest-potential ones. Is it possible for the same brand to target different segments? The answer is, yes, but there are limitations. Staying with the heartburn market, Tums® (GSK) directly attempted to target the female calcium supplementation market before medical experts and regulators questioned the usefulness of the form of calcium in Tums as well as the ill effects of long-term, heavy use (typical of most Tums users). On the positive side, Minute Maid® (Coca-Cola Co.) offers an orange juice variant that contains low concentrations of calcium plus Vitamin D to aid absorption as part of a normal, one-glass-a-day routine. Arguably, both brands had an opportunity but Minute Maid, in this case, had the right product formulation and usage profile to make it work. There are a few examples of umbrella or “master’ brands that have been spectacularly successful in crossing over to unrelated segments such as Virgin Atlantic, Virgin Mobile, etc. but most people forget there were Virgin failures too like Virgin Cola, Virgin Vodka and Virgin Cars. Clearly, other success factors are involved which is why we need to understand where targeting and positioning fit in.
If segmentation considers the aggregate of homogenous consumers, then targeting considers the detailed profile of individual consumers within the segment and how best to reach them. In my experience, there are few marketing investments with a higher ROI than efforts aimed at understanding the customer. It’s true that many successful start-ups were inspired by solving the founder’s problem or need but few have grown without considering the needs and preferences of someone else! Drilling down on that “someone” rather than “anyone” usually involves talking to users and non-users about a range of issues including purchasing habits, buying influences, usage habits and attitudes. Competitive advantage can be created at this stage through superior customer knowledge and applied insights. While Steve Jobs famously said it wasn’t the customer’s job to know what they want, it is certainly the marketer’s job. The second part of targeting is reaching these target customers via communication as well as supply channels. Traditional media metrics like reach, frequency and CPM (cost per thousand impressions) have been augmented by various attempts to measure engagement and response. With digital communication tools and cheap point-to-point distribution options, truly differentiated products and services now can reach customer targets more effectively and efficiently than ever which, in turn, has profoundly influenced segmentation strategies. This differentiation requirement is the focus of our third factor, Positioning.
Positioning and its cousins go by many names, including USP, value proposition, brand promise, etc. The common denominator in most of these concepts is the objective of occupying a clear, meaningful, competitively advantaged perception in the mind of a specific target customer. The additional burden is to actually deliver on the perception and to do it profitably (or at least consistent with the organization’s goals). It is not usually the marketer’s role to come up with the specific word, phrase, image, scent or sound that communicates this positioning. That’s often the role of a creative agency. Marketing’s role is to confirm the target segment, including likely competitors (Step 1), understand that customer in depth (Step 2) then describe in plain language the basis by which we will attract and retain these targeted consumers (Step 3). In my Procter & Gamble days, we called this the marketing strategy and it was the anchor or umbrella strategy that guided all sub-strategies such as pricing, advertising, distribution, etc.
A good marketing strategy only changes when a disruptive competitor appears or a strategy shift is warranted. Staying with my heartburn example, I learned how dramatically perception can change with just a few choice words. We tested customer response to a concept that focused on “preventing heartburn” (by taking a pill before eating the foods known to cause heartburn). The consumer interest – even among frequent sufferers – was negligible. However, when the idea was rephrased as“eat the foods you love”, the concept interest shot to the top. The word I love to use to describe this optimal positioning is “delight”: moving beyond mere satisfaction to deliver more than what the customer expected. In my example, the only way this latter concept came to light was through an understanding of how frequent sufferers viewed their “fate” as never being able to eat the foods that triggered their heartburn.
In summary, great marketing must be powered by a deep understanding and artful application of segmentation, targeting, and positioning. Perhaps most importantly, these three strategies are not developed independently but must be integrated with clear linkages evident between each strategy.
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Gary Lyon is Principal Consultant at Portage Solutions and a “graduate”of the FMCG and consumer healthcare industries.