by Kenneth Rudich

You may recall that market segmentation is about moving away from a one-size-fits-all mentality when it comes to delivering value.
 
Instead of viewing customers as a single-minded group, all with the same motives and needs, it investigates how motives and needs might differ among them, and how those differences might influence their consumption patterns.
 
It then segregates the larger potential market into smaller groups based on those differences.
      
The intent is to improve the level and quality of interaction with each group by targeting the value chain components to match up with the customer motives and needs.  This can increase both the effectiveness and efficiency of the marketing initiative.

a market segmentation illustration

Here’s a fairly obvious illustration to demonstrate how it works, and what makes it so potentially worthwhile for almost any business venture to consider.

Let’s start with the demand for a canister of mixed nuts that contains an assortment of peanuts, cashews, almonds, Brazil nuts, hazel nuts, beer nuts and pecans.  Let’s say sales are brisk and it’s profitable.  Let’s also say we’re in the habit of treating customers as one-size-fits-all, and that this is the only product we sell.
    
What happens if some people want only almonds, or only cashews, or only pecans?  Would they be willing to buy the entire mix of nuts to fulfill their desire for, say, almonds?  Or would they forgo the purchase due to a lack of value?
 
Or what if they do want a mix of nuts, but only with hazel nuts, cashews and pecans in it?  Perhaps now they’ll buy the canister and then throw away the nuts they don’t want.  In this case, the compromise they must make to fulfill their desire will have reduced the value of the product offering.

As you can see from this simple example, the demand for nuts can be divided into target groups or segments based on preferences and motives.  It might even be further divided into sub-segments, such as salted versus unsalted, a premium brand versus a generic brand, a large package versus a small package, and so on.

value chain implications

If we evaluate these different desires and motive against the components of the value chain, it becomes apparent there’s an opportunity to improve the match between the demand for nuts and what is being offered.  The one canister of mixed nuts tends to under serve the real market opportunity that exists.  Potential customers will be lost, and you’ll be inviting competiton from others who will gladly fill that gap while also trying to win customers away from you.

Perhaps the ideal solution is to put bins of nuts separated by category on the store floor so customers can make their own individual choices.  If allowed to fill their own container, they can get the nuts they specifically favor in the desired amounts they want.  This relates to the concept of modular thinking and how it supports mass customization.

But not many stores can afford to give up such an allotment of space for nuts.  So you may have to work around a distribution channel constraint (i.e., shelf space) by pre-packaging the nuts in a manner that still matches up better with the targeted needs and desires than does the current single canister of nuts. 

Perhaps you’ll face other value chain implications and need to address them as well.  Or maybe you’ll have detected something during the course of a market opportunity scan that unlocks a hidden opportunity, one that will leave you with a competitive advantage after it’s been executed.

market segmentation for your business 

This simple example barely scratches the surface for using market segmentation.  But it does illustrate the rationale for considering the possibility of a segmented demand, and for tailoring the product offering to match as closely as possible with motives, needs and desires.

Have you taken the time to consider how market segmentation might apply to the products and services you offer?
 
In the next post to MSM, I’ll explore another circumstance where a poor response to a market segment opportunity left the door open for an aggressive competitor to come in and seize it.       

by Kenneth Rudich

The good news is: whether you’re a small business or goliath company, internet marketing has ushered in an unprecedented opportunity to make a meaningful connection with your customers and prospects.

The bad news is: it isn’t always as free or inexpensive or easy to leverage as it may initially appear on the surface.  In fact, it can be full of hidden costs, and they can be especially devilish for the small business concern.

A lot of the hidden costs, or at least the ones I’m referring to, lurk amid a dense forest of freebies.  They sit tucked away in the shadows or camouflaged in its underbrush.  In many instances, they don’t come out until you’ve already incurred them.  And even then they may not be all that readily visible for the naked eye to see.

the internet marketing kingdom of freedom

As someone who regularly canvasses the internet for new and novel marketing tools, I come across countless examples of what has now become an internet marketing maxim.   It goes something like this: you don’t sell to customers, you court them.

One offshoot of this approach has been the widespread use of giving away something free to bring prospects in and befriend them.  There are free apps, free platforms, free monitoring tools, free information kits, free trials, free this and free that – in the internet kingdom of freedom, the already astonishing number of freebies seems to be growing sizably larger with each passing day.

And yet, paradoxically, with everyone giving away something for free it still ends up exacting a cost.  What’s worse is you can’t avoid it, no way, no how.   Heck, even if you were somehow able to confine yourself to using free and only free stuff, you’re still bound to encounter the reality it produces, which is that it inevitably drives up the cost of doing business in one way or another.  And nobody but nobody gets a free pass on that.

no free passes on internet marketing costs

How it drives up the cost of doing business will vary by circumstance.  Here are a few examples to illustrate what I mean:

1. Discovery Costs – This is the time it takes to break through the clutter of freebies just to find the few that are relevant to your internet marketing initiative.  If time is money, this represents the cost of time.  Additionally, if it takes time away from something that would have been a more productive use of your time, then you get slapped with the double-whammy of a lost opportunity cost on top of it. 
2. Learning Curve Costs –This is the time it takes to learn the basics of new applications, tools and techniques; and then, of course, there’s the additional time it takes to actually master them.  I refer you back to the discovery costs up above for a glimpse of the cost implications associated with this.
3. Application Turnover Costs – The rapid cycle of innovation that keeps the internet moving forward in leaps and bounds typically forces you to either frequently upgrade an old version of something or replace it with something new.  This may come with a material cost in terms of cold hard cash, or it may be just another bleeder of time.
4. The Cost of Staying Competitive – Given your druthers, you might not want to do any of the above work.  However, if your competition has been lured in by the freebies and is now doing something that has yielded a competitive advantage, you may very well face the dual cost of having to do it anyway, along with the cost of playing catch-up because now you’re lagging behind.
5. Outsourcing or New Staffing Costs – You’ve outsourced or brought aboard new staff with internet marketing expertise to handle it.  As a result, you’ve traded one cost (time) for another (money).  This is the principle of “an equal and opposite effect.”
6. The Cost of Doing Nothing – The risk of lost opportunity costs, of being competitively impaired, or becoming obsolete and/or irrelevant comes with the decision to do nothing.  Particularly if your business caters to the under 45 age group, the risk grows increasingly larger with each passing generation.  After all, they’re weaned on these technologies, and they heavily rely on them in their daily lives.  

you can’t flee it, so face it

In the contemporary business climate, it’s probably impossible to hide from the hidden costs of internet marketing, so you might just as well face them head on. 

Ipso facto, the question is not how to avoid the costs of internet marketing, but how to successfully contain them (or at least prevent them from running away on you); or even better, smarter, and truly productive, how to establish a good ROI from your internet marketing investment?

help! which one?

by Kenneth Rudich

Really.  If you do nothing else during this visit to Marketing Strategy Management, please help me decide on a logo by leaving your vote in the comments section below.  Which of the two logos above do you like better?  Or, if you don’t like either, that’s an option too.

After all, a logo is an important part of the overall marketing initiative, whether it’s online internet marketing, social media marketing, or offline marketing.  It assists with maintaining the continuity of the brand by leaving a consistent and, hopefully, lasting impression.

Some might even question why it’s taken me so long to establish one.

a little background about marketing strategy management

I started Marketing Strategy Management without putting a lot of thought into the aesthetic quality of its appearance.  The skin was secondary to my initial concern, which centered on the task of developing good content as early as possible.  I was eager to get the ball rolling rather than be held up by matters that could easily steal time from achieving that objective.

We’ve since explored a variety of subjects, like search engine optimization (SEO), social media marketing, internet marketing, social marketing, marketing communications, branding, and more.  My favorite topic, and the one I’ll be focusing on with greater regularity in the future, is using a value chain approach to develop and manage a marketing strategy.  They are all good and relevant topics, and I very much enjoy working with them.

In retrospect, I think it was a good idea to start with a single-minded focus on creating content.  I am pleased with, and gratified by, the rapid growth in both the quantity of visitors and the number of subscribers.

More importantly, I am humbled by the caliber of the people who stop in and leave insightful comments about the content they’ve discovered.

In addition to these thoughtful observations, many of you have also taken a moment to share suggestions for improving the blog.  In fact, second only to the insightful comments about the material have been thoughts related to the visual appeal of the skin – or rather, the lack thereof.  My favorite came from a fellow who, after commending the content of a post, quickly added, “…but your opera is a bit wonk mate.”  Others chose “bland” over “wonk.”  Either way, I got the idea.

Simply put, the time has come to consider making renovations.  And not just consider it, but actually make them.  I want to thank everyone for nudging me in that direction.  I’m always open to constructive criticism, and I’m glad so many of you were kind enough to give it.

Moreover, I hope you’ll keep on making suggestions and offering comments.  I’m also open to having people author posts for MSM or provide any other material they believe is relevant.  I regard this blog not so much as my own, but as a community blog – one that embraces everyone’s ideas.  And that community, at least in my mind, spans the entire reach of the internet. 

what’s ahead?

The renovation won’t be done overnight.  I still believe strongly in maintaining the quality of the content, whether I produce it or it comes from another source.  That alone consumes a fair amount of time and energy.  Given other responsibilities that I also have, time is a somewhat limited commodity.  I’ll have to find it where I can for making visual improvements.

And I will be trying other new things as well.  But for now, I’m going to start by adopting a logo.

Again, please take a moment to give me your thoughts about the logos you see at the outset of this post.

May we all be exceedingly adept in our marketing efforts!

Best Regards, Ken

creating value from trapped value

by Kenneth Rudich

Trapped value may be lurking within your value proposition, just waiting to be sprung. 

Release it, and it will enhance your offering.  Neglect it, and it will impair your ability to deliver a full value customer experience.

what is trapped value?

Simply put, trapped value is the untapped opportunity for making the perceived benefits, or the costs, or both, match or exceed customer expectations.  Even if you’ve managed to match the expectations, you may be overlooking a chance to exceed them — and consequently produce a sense of delight.

Trapped value ordinarily revolves around matters like efficiency, accessibility, and/or customer empowerment.  Improvements in any one or combination of them can yield an appreciable increase in value.

trapped value and the value chain for marketing

The potential for trapped value underscores the rationale for advocating the use of a value chain approach.

The value chain is a cross-functional, process-oriented analytical tool.  It looks at the value creating potential of an organization’s activities from an end-to-end perspective, as opposed to only from within each functional area. 

End-to-end factors in the series of hand-offs that typically occur between functionally different responsibilities, from the moment a customer demands something to the moment it is delivered (and even thereafter for after-the-sale support services).  In this sense, it transcends departmental boundaries. 

For instance, selling a product is one function and producing it is another.  It’s conceivable for each separate function to be individually optimized, yet the interface between them could be compromised by a detrimental process flaw.

marketing value creating scenario #1

Here’s an example based on a true story.  What if the sales people only worry about getting the product sold (because that’s what they’re rewarded for), and not so much about accurately procuring customer preferences for how it should be configured or customized?

In this situation, the production function is left to put together a product as best as it knows how, but it will be doing so at the risk of producing a lesser outcome than might otherwise be achieved if it knew exactly what the customer wanted. 

Some customers may feel okay with the end result, others may be resigned to accept it for what it is, still others unhappy but not complain, and then some will outright complain.  In other words, the company has a value proposition that is plagued by inconsistency.  Not only that, but it may be losing an opportunity to deliver the kind of value that delights the customer every time.

marketing value creating scenario #2

But what if the manufacturing department created an order processing system, and the sales force followed it because they were also rewarded for accurately capturing the customers’ specifications?  Now there’s a process in place for making sure the customer receives exactly what is wanted.

On top of that, what if distribution periodically sought to get the product to higher valued customers ahead of the originally promised delivery date, perhaps by upgrading it to overnight express?  Or by collaborating with sales and manufacturing to pre-arrange a faster than expected delivery response?  Would that not add further value fulfillment to the customer experience?

efficiency, accessibility, and customer empowerment

Though this may seem like a simple fix as presented here, it can be surprising how often and for how long bad situations go unfixed in the real world.  Unless an organization proactively concentrates on business process improvement, flawed or inefficient processes can remain in place for quite a while.  It often takes a big problem or crisis to force the issue.

But for organizations that do actively investigate the potential for improving their business process designs, the rewards can be considerable. 

Consider the above example after it’s been corrected.  You have an empowered customer, the processes between placing the order and delivering it have been endowed with the attribute of optimal efficiency, and the customers’ accessibility for getting exactly what they want has been significantly increased.

Related Articles:

Another Marketing Perspective for Creating Value

Creating Value for Customers-Two Perspectives

Four Value Creating Scenarios 

Creating Value with Modular Thinking

The Complexity of Delivering Value

Creating Value or Climbing Up a Waterfall?

click on image to enlarge

by Kenneth Rudich 

Here’s a marketing riddle for you: when is old new and new old? 

The answer: when you bring the Grateful Dead into a discussion about contemporary online marketing. 

For those of you in the dark about the identity of the Grateful Dead, they were an American rock band formed in the San Francisco Bay Area in 1965.  For those of you in the know, that simple description, if left as is, may well be the biggest understatement of the last five decades.
 
Lurking behind the laid back image of the band’s hippie subculture persona was a business enterprise worthy of idolatry.  Which probably goes a long way toward explaining why modern pundits and business practitioners alike are…well…marveling over it to the point of idolizing it.
 
One could arguably say they created the groundwork for much of contemporary online marketing — long before the internet even existed, no less. 

It’s a strange twist of fate when you think about it.  Instead of being motivated by the internet, the Dead were driven by a desire to be anti-establishment.  Anti-establishment meant unconventional, which they resoundingly were – in their art, their business, and their marketing.  They shrewdly pioneered ideas and techniques that made them stand well apart from corporate America, in isolation, all by themselves.  They were the epitome of anti-establishment. 

But I guess the joke – to the tune of probably hundreds of millions of dollars – was ultimately on them.  Because now corporate America, the so-called establishment they wanted so badly to distance themselves from, is widely adopting their ideas and practices.  The Grateful Dead is now the establishment that fostered the new establishment, at least in business and marketing terms. 

so what did they do?

Here’s just a brief summary: 

The band brought together a community of people based on common interests.  These people formed tight-knit friendships even though they were geographically separated.  Indeed, the bonds became so strong that the band accumulated a following of fans that would crisscross the country with them while they were on tour.  This following was known as the “Deadheads,” and they truly wanted to be camping out together with each other as much as they wanted to be with the band.  This scenario, of course, describes a social media marketer’s most cherished dream.  

The Dead focused intensely on creating value for their most loyal fans.  They established a telephone hotline that alerted fans to upcoming tours before any public announcements were made.  They reserved seats for their fans and capped the ticket prices, which they distributed through their own mail-order house.  As a result, fans never had to travel to far away cities just to buy tickets, or camp out to get them, and they got the best seats available.  If you read “An Economy Built on Quicksand” in this blog, you’ll recall that corporate America didn’t come close to showing this kind of customer care until about the mid-1980’s, and that was only because the competition from Japan forced them into it.  Remember, the Dead formed in 1965.  

The Grateful Dead incorporated early on and founded a profitable merchandising enterprise.  They even went so far as to let fans tape their live shows, foregoing those potential record sales, knowing that the viral effects of having it freely shared would ultimately pay off  in the sales of their tickets and merchandise.  And that was all before anyone had ever even heard the term viral marketing.  

old marketing, new marketing, old marketing?

I could go on, but I think the point is well made. 

For all the online marketers who pride themselves as having been the inspiration behind the nouveau marketing practiced on today’s internet, you may want to pause a moment and tip your hat to the real predecessors of that nouveau marketing.  After all, it’s a clear-cut case of old is new and new is old.

click on image to enlarge

by Kenneth Rudich

Effective marketing?  Don’t do it!

A competitor once offered me that gold nugget of a marketing tip.  I have been keeping my eyes peeled for evidence of him following his own advice ever since.

Truth be told, it’s a good idea to keep an eye on the competition regardless of whether you have been goaded into it or not.  It’s important to know where you stand relative to them.  Do you have a competitive advantage, a competitive vulnerability, the potential for improving your competitive position?

Gathering this information will help your strategic planning.
 
There’s even a method to guide the process.  It’s called a SWOT Analysis, where the acronym stands for Strengths, Weaknesses, Opportunities, and Threats.
 
Only, in this post, I’m going to suggest a slight modification in how to use it.  For our purposes, you’ll be enlisting it to see how well you measure up, whether favorably or unfavorably, with each key competitor.

And then you’ll incorporate the results into your strategic planning.

the conventional use

If you’re unfamiliar with the conventional use of a SWOT Analysis, let me briefly walk you through the basics:

• Strengths: your business’s internal characteristics that are favorable to achieving its objectives.
• Weaknesses: your business’s internal characteristics that could or do impair the achievement of the objectives.
• Opportunities: external conditions that favor your business, like new avenues for growth or expansion.
• Threats: external conditions that could or do impair your business, such as a bad economy. 

If you look at the generic value chain for marketing, this analysis would investigate every aspect of it.  Again, the idea is to inform the strategic decision-making process in some manner.  For instance, you might focus on turning a weakness into a strength; or, if you can’t do that just now, try minimizing or avoiding the harm it could unleash.
 
If one or more external conditions are favorable to your business, you’ll want to assess how you might exploit them to advantage.

Okay, that’s the more conventional deployment for a SWOT Analysis.

a competitive swot analysis

A competitive SWOT Analysis operates under a slightly different mindset.  It aims to assist in determining how well your business is positioned against each key competitor.  So, it might ask questions like:

1. How do your strengths compare with the strengths of each competitor?
2. How do your weaknesses compare to the weaknesses of each competitor?
3. Are there comparable functional areas where you’re strong and they’re weak?
4. Are their comparable functional areas where you’re weak and they’re strong?
5. Can you learn to turn a functional weakness into a strength based on their functional strengths?
6. Is there an opportunity to advance your business objectives by exploiting their weaknesses?
7. Is there a threat of them using their strengths to exploit your weaknesses?
8. Are there any external threats that will affect all of you?  How will it affect each of you?
9. Are there any external opportunities that are common to all of you?  Who is likely to pursue it, and what are the odds for success among those that pursue it?
10. Given the totality of this information, are you positioned in the market – or can you position yourself – in a way that differentiates you from them, and/or puts you in a more favorable light than any or all of them?

This is not an exhaustive list, but you get the idea.   It uses the SWOT Analysis to compare and contrast for the purpose of eliciting strategically valuable insights. 

as for the matter of effective marketing

If you are not one of my competitors, then by all means do it.

If you are a competitor, DON’T DO IT!

At least, that’s my advice.

Related Articles:

Using a SWOT Analysis for Personal Strategic Planning

I’m feeling a bit glum tonight, because I quit a business that my father and I joined together. It was all about using traffic exchanges, safelists, banner rotators and Traffic Hoopla to promote ‘their’ domain, not yours! If there is one thing I’ve learned, it’s either have a well grounded blog with a reputable provider or your own domain. Affiliate pages are fine for brief promotional purposes, but don’t throw everything into the promotion of some domain, which may or may not exist six months from now. Those people never tell you anything. They say, “We have been in business for five long years!” BIG DEAL!!! -I got a parakeet older than that.

Here’s how I network. I post my thoughts on another blog, sharing what I know and helping it to get traffic. Then I find five more, posting to them as well, encouraging those bloggers to post to my blog, so that they can get even more traffic. Instant success! I didn’t have to join a cult or reboot the way I think. I’m still me and my sister blogs are still “them”. Nobody gets hurt and everybody benefits. What you will see out there today is people trying to build up themselves by using others. It doesn’t work. But most people don’t know that if they would just interact online, meeting other people and sharing content, viral forces takes over, exploding site traffic.

I recently commented a blog saying that online viral activity is really just the unpredictable nature of human interaction. A farmer opens a general store, because he just can’t take all the chores and constant worrying about the yield of crops. It’s new to him, but he’s always wanted to be independent and self reliant, rather than dependent on the value of his ever dwindling crop. Any of this sounding familiar?

So he gets all of his stock sorted out, prepared for sale and immediately he begins to worry that nobody will show up. ‘What if I’m in a bad location?’, he thinks. ‘What if my product is of poor quality?’ Suddenly, in strolls Mrs. Barnes on her way to the Cracker Barrel across town. She might have gotten the honey at the grocery store had someone not called her at home and said, “we’re all out of honey up here!” She glanced over and got that old feeling people get when they see a ‘General Store’ and said, “maybe he’s got some honey!” Gee what a coincidence, he just happened to know that that kind of thing can be in demand at the most inopportune times. Wow!!!

He also didn’t expect Ed, one of his farming buddies to need 25 bundles of twine to tie back his corn stalks to keep them from sweating too much and deteriorating in the excessive summer heat. As if it weren’t enough that the livery stable ran out of horse feed and several farm owners had to come over and buy up all of his feed, it was just unseemly that the chicken farm would have sent their hand 60 miles for 1200lbs. of his chicken feed , instead of just going somewhere closer to home. Now that’s viral!!!

I want to thank Ken for allowing me to post my thoughts here at his blog. I hope you’ll join this blog and just participate. It can really make a difference, but you may never know until you get out here and try. Life is risk, but only to them who can truly face fear.

consumer culture

by Kenneth Rudich

Anyone familiar with the halcyon years of the American industrial revolution will surely appreciate just how dramatically different things are today when it comes to the role of marketing.  

Back then, business revolved around the idea of achieving profitability through mass standardization.  It was about cookie cutter efficiencies and economies of scale; unskilled labor and assembly line construction; few product choices and one-size-fits-all customer care.  It could be labeled inside-out thinking, and perhaps nothing exemplified this formula better than Henry Ford’s rumored quip about the Model T, when he reportedly said, “You can have it in any color as long as it’s black.”  

Of course, people ultimately were given a few more options than that, but the companies themselves tended to replicate the same business model.  There was mass production, with mass marketing and mass distribution, for mass consumption.  Seldom did you see a major player stray far from this heavily trodden path.                          

Though that time period has long since receded from view, it does deserve some credit for keeping the U.S. economy humming along over several decades, and its enormous success – at least in that regard – led not only to the rise of a robust middle class but also a consumer culture.  As it turns out, that same consumer culture – or rather, the maturation of it — is what lies behind the emergence of another, newer, post-industrial age marketing trend. 

In a significant reversal of thinking, today’s single biggest challenge centers on building a memorable brand from an outside-in perspective.  Outside-in thinking attempts to craft a product or service that speaks directly to people’s motives and promises to fulfill them.  And with help from innovative technologies, modular designs, and creative business practices, it has indeed become possible to satisfy needs, desires and tastes unlike ever before.  

This in turn has given birth to the idea of mass customization (almost sounds like an oxymoron, doesn’t it?).  Consider, for example, the stark contrast between Henry Ford’s musing about the Model T and a current tv commercial tag line for a contemporary phone vendor, in which the announcer proclaims, “You don’t need to get a phone, you need a phone that gets you.”  Or another commercial with the claim: “Auto insurance isn’t something you should carry; it’s something that should carry you.”  And then, too, there is the internet itself, with all the countless examples it has to offer. 

Whether you use mass marketing, mass customization, or some combination of the two, the age of the product or service experience is upon us.  How have you tailored your brand to keep it fresh and make it stand out from the crowd?