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6 December 2014

Defining the Market

Tag(s): Marketing
I have just been engaged to advise a senior executive in a major supermarket chain. It’s clearly confidential but it’s no secret that all the major retailers are facing challenges from both online and convenience retailing. The problem is that both channels are profit diluting. It’s doubtful if anyone makes money out of online retailing. Amazon, certainly don’t, they lost $500 million in the past six months but their shareholders seem happy to support them while they gain share in a whole variety of markets. Strangely they get criticised for not paying taxes. Why would you pay taxes when you’re not profitable? But that presents a dilemma for traditional retailers and the first thing they have to decide is what market they're in. This is a classic Marketer’s response to situations but it’s amazing how often it’s forgotten. I wrote on this subject as follows in my book The 20 Ps of Marketing which came out exactly one year ago this week:

“Theodore Leavitt joined the staff of Harvard Business School in 1959 and at the age of 34 published an historic article in the Harvard Business Review that he was later to edit. Called “Marketing myopia” he asked “What business are you in?” It is an essential step in Market analysis and subsequent segmentation to define the business in which you are in and therefore with whom you compete. Classically the American Railroad companies could satisfy themselves that they retained significant shares of the railroad industry vis-à-vis each other. However that industry so defined was in long term decline to the benefit of first automobiles and second airplanes. The rail industry should have defined its Market as Transportation and would have seen the dangers much earlier. I call this process ‘Defining Away the Competition’.
 
 But it would be equally unhelpful to define it too widely. As General Manager of Green’s of Brighton I could call ourselves brand leaders of the cake mix Market which we were by some margin. More correctly we included other forms of shop bought cakes in our Market definition to acknowledge the much more Powerful and growing business of brands of Ready-To-Eat cakes such as Mr Kipling. However, it would have been fatuous to define our Market as all food because then our share would have been miniscule and everything from fishcakes to baked beans our competition. This would not have given us any useful indicators for action.
 
 Once we have defined our Market correctly, neither too broadly nor too narrowly, then we can segment the Market by behaviour or some other attribute of the customer. We can then go through the rest of the process defined above. Positioning concepts might be divided into three general categories.
 
  1. A Product can adopt a functional Position in that it solves problems or provides measurable benefits to customers. Here the customer is invited to use rational thought to appreciate the Positioning.
  2. A Product can adopt a symbolic Position in that it enhances the customer’s self-image, or his sense of belonging or fulfilment. Here the customer will react emotionally.
  3. A Product can adopt an experiential Position in that it provides sensory or cognitive stimulation. Here the customer reacts viscerally or by instinct.
 In going through this process we will be also defining the target Market for our Product. This may use evidence of demographics but it can also be about attitudes, behaviours, social class, geography and many other sub-divisions of society. It is also important to remember the issue of timing because Markets are dynamic. I have been a bird lover since I was very young and could not imagine ever shooting a gun at a bird. However, when my wife and I were invited by my advertising agency to an afternoon of clay pigeon shooting I was interested. Clay pigeons are actually plate-like discs of clay which are fired into the sky at different angles. The shooter has to aim and fire his shotgun in the twinkling of an eye. At first I was missing regularly until I worked out that the disc was moving fast through the air and so I needed to aim my shot in front of the disc and wait for the disc to arrive where my shot would be. This proved much more successful.

 So it is with Marketing. We have to aim our shot (brand proposition) at the target (consumer) where we think she will be at the time our Product reaches the Market. Once again we can see the importance of timing in Marketing. By the same token we need to keep our Market analysis and Positioning statement up to date because the Markets and the brands in them will surely evolve in different directions over time.

 This is especially true if a brand goes through changes of ownership. Pentland enjoyed massive success in rePositioning the Reebok brand. It had bought a controlling interest for $77,000 and then sold it ten or so years later for $777,000,000, one of the deals of the century. With the proceeds it started buying up other well-known sports brands which had fallen into disrepair. One such was Speedo, originally an Australian brand of swim wear that had gone through various changes of ownership and also sub licensing agreements that meant that by the time I was responsible for the brand on a world-wide basis its Positioning varied hugely around the world. The brand was now run from Nottingham, hardly famous for its beaches and so the centrally directed brand Position was a performance brand underpinned by sponsoring Olympic swimmers and seeking to dominate the league table of swimming medals every four years. Meanwhile some of its leading licensees Positioned it as a beachwear brand, almost entirely at the opposite end of the spectrum. Its leading markets included Brazil with its famous Copacabana beach, Australia (Bondi), USA (Malibu), France (St Tropez) and so on. It was hard to reconcile these differences in a single tight Positioning and this acted as a brake on the development of the brand.”

That is taken from Chapter 10 on Positioning in The 20 Ps of Marketing. If you haven’t yet got round to ordering it, (and why not?), there’s a link to the publisher on the home page of this website. If you have, then why not order another copy as a Christmas present for your best friend?

Copyright David C Pearson 2014 All rights reserved



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