1. ©2003 Mohan Sawhney Kellogg School of Management Northwestern University Segmentation and Value Proposition Design

2. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design

5. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design

8. Segmenting the PCS market: Traditional (“A Priori”) Approach Segment Identities First Define Segment Identities Then Search for Response Differences

9. Response-based approach (Step 1) Use These to Define Benefit Segments First Identify Response Differences Response Segments

10. Response-based approach (Step 2) Work Backward to Identify Segments Define Response Segments Response Segments

12. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design

15. Segmented service model at Fidelity Access level Customer type Reps to customer ratio Private access > $5mm in assets 116:1 Premium access $500K-$5mm in assets 250:1 Active traders >36 trades/year 440:1 Preferred access $100K-$500K in assets 440:1 Standard access < 100K in assets 1,500:1 “ Penalty box” 9,000 problem customers 900:1

16. Steps in strategic target marketing Understanding market segmentation Approaches to market segmentation The process of market segmentation Target market selection Putting segmentation into action

17. Overview of target market selection High Low Strong Weak Company Capabilities Segment Attractiveness Aim : Select segment where company position is strong and market is attractive Company Analysis Customer Analysis Competitor Analysis Industry Analysis Profitability Value Chain Benefit Segments Segment Attractiveness

18. A template for segment evaluation

19. Targeting strategies S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 S 1 S 2 S 3 O 1 O 2 O 3 Mass Vertical Horizontal Niche

20. Steps in strategic target marketing Understanding market segmentation The process of market segmentation Acting upon segmentation Target market selection Value Proposition design

23. Examples of positioning statements AVIS “ For business people who rent cars , Avis is the company who will provide the best service because the employees own the company .” HOME DEPOT “ For do-it-yourselfers , Home Depot offers the best prices because we are the largest building supply company. ” BODY SHOP “ For people seeking wellness , the Body Shop offers the most natural bath and cosmetic products because we are the most environmentally friendly cosmetics company .” SOUTHWEST AIRLINES “ For short-route travelers , Southwest Airlines offers the best prices with reasonable and dependable service because we operate point-to-point service and don’t charge more for last minute bookings.”

24. Covering your bases in positioning: The “positioning diamond” What? Definition of offering and benefits For whom? Target customers or prospects Against whom? Competing alternatives Why? Points of differentiation

30. Summary: A positioning framework Adapted from: Joan Giese Positioning Framework document Product Name: Target Audience: Specific Audience Needs: Functional Benefits: Emotional Benefits: Economic Benefits: Positioning Statement (across audiences): Value Proposition (tailored to this audience): Key Positioning Pillars: (prioritized) Pillar 1 Pillar 2 Etc. Audience 1 Relevance to Customer: Degree of Differentiation: Believability by Customer: Support Points: Proof Points: (attached) Audience 2 Relevance to Customer: Degree of Differentiation: Believability by Customer: Support Points: Proof Points: (attached)