Hello, we are now in the next step of the marketing strategy definition, we are getting to the real center and probably most important part of the marketing strategy definition, which is the target segment. Let me remind you that we basically identify the main parts of the marketing strategy, defining objectives, then defining the target segment, and then defining the positioning. The objectives are done, so we have discussed financial objectives, non-financial objectives, and customer objectives, attraction retention. Now we get into the target segment, the target segment as we were discussing, is probably the most important part, because basically it's what is going to define the rest. The target segment is long-term, the target segment is just strategic, the rest is tactical, and is probably short-term. So finding the right target segment for your brand is probably key, how can you do that? Well basically, let's try and do an analysis, let's try and go step-by-step. The first thing that we do is, we need to have different groups of customers that have a common need, and a common buying behavior, this is called a segmentation. That's why the process that we're going to see here is many times called STP, meaning Segmentation, Targeting, and Positioning. As you can see in the slide, segmentation is first, then it comes targeting, and finally, we define positioning. So first, and I'll begin with identifying segments, the market is never homogeneous, we look at the market trying to find groups of customers that have a common need, and a common buying behavior, can we do that? Yes. Because we are all humans with different needs, and we tend to group, and we can be grouped in groups of individuals with a common need and a common buying behavior. So for example, when you look at the hotel industry, the typical segmentation that they do is not basically about the gender or the age, basically is leisure traveler or corporate traveler, a very different segmentation. Segmentation based on what? Segmentation in this case, based on behavior. So every industry has its own segmentation, and your challenge, you guys you need to identify what is the relevant segmentation for your industry? If there is no segmentation, it's your time to try and identify segments. So let me show you a very brief definition of segmentation. Segmentation is identifying and profiling different groups of buyers with a common need and a common buying behavior, who might require separate products and/or marketing mixes. That's basically what we're looking for, a group of customers with a common need, common buying behavior, that way we can actually reach with some marketing actions or marketing mixes. Then what are we're going to do? We're going to try and identify what is the best segment for my brand? What is the segment that could be more willing to buy my product or services? Where do I have the best chances of selling? So that will be the target, and the final stage in this STP process, we'll be defining the positioning. How do I want to be perceived? That will happen on the next video. So let me try and identify possible ways of segmenting the market, segmenting the market is never the same, different industry require different segmentations. In this slide here, you have a list of possible segmentation variables, geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation, so different ways actually to look at the market. What is the good one? It depends. It depends on what you're looking for, and it depends on your product. The classical segmentation was basically socio-demographic, gender, age, education, income, is this relevant for you? Maybe yes or maybe no. I mean actually the socio-demographic segmentation historically has been used because that's the way the media is actually segmented. So maybe yes or maybe no, because maybe you're not going to use mass media. So let me take you to the example of the Nissan Leaf. In the Nissan Leaf case, you have a very sophisticated segmentation, it's a good example for you to look at the very, very well-done segmentation. This segmentation here as you can see in the slide, is by willingness to adopt the innovation, by attitude towards the car, by lifestyle, by gender, by being previous Nissan buyer, non-buyer, by ownership: private versus corporate, by geography. So different ways of segmenting the market, a very sophisticated segmentation. So in that case, you have the whole market segmented for you, and now is the moment where you have to choose, where can I find 2000 individuals willing to buy this car? In what segment do I have more chances of selling? That will be defining your target segment. So how are you going to make this decision? Because that's basically what you're training here yourself, to make decisions. So how are you going to make the targeting decision? You have the whole segmentation in front of you, and that's the moment where you need to define criteria to make your decision. So what criteria should you use to do your marketing plan? In the assessment that we're going to do later, you should be able to define your target segment by using targeting criteria. What are the criteria that we use in a marketing plan? Just common sense, size, if possible go for big segments, the bigger the better, more chances to sell. Trend, if possible go for segments going up instead of segments declining. Affinity, so if there is a good fit between your product offer, and then it's of the segment. Customer acquisition cost, how much does it cost to acquire a customer in this segment? Is it a very expensive customer to acquire? Maybe I should forget about the segment. So customer acquisition cost is something that is absolutely key. Competitive rivalry, we need to know exactly what is the competitive situation of the segment, because the segment could be attractive, but if there is a lot of competition there, maybe it's not so attractive. The last one is profitability, are we going to be able to make money in this segment? Is the segment willing to pay enough to leave a profit that we consider good for us? So those could be basically the main targeting criteria. How can we put this in practice? Well, I'm going to propose using one matrix that I call the targeting matrix, that is very interesting and very simple and easy to use. So in this matrix basically, you're going to have segments, the number of segments that you are able to identify, I don't know. The leisure traveler, the corporate traveler, and the airline crews, for example that's a typical segmentation in the hotel industry. In columns, basically you put the criteria, size, trend, affinity, competitive rivalry, profitability, and customer acquisition cost. With all the segments, basically you're going to rank the different segments against the criteria. So basically, that will be the way to justify, why do you think this segment is better than this other one? So basically you analyze the different segments against the different criteria, you put rankings or you analyze in one to five scales, where one is very low five is very high, and you choose the one that scores the highest. So that will be basically justifying and having a clear metric to define your target segment. So I have an example here from the Nissan Leaf case. Basically what you can see, how do we do targeting matrix and how do we end up choosing the segments that are scoring the highest in the targeting matrix? So the segments are probably more promising in terms of becoming a target segment. In the next video, you will be able to see positioning and with this basically we should be closing this STP process, so Segmentation, Targeting, and Positioning. Thank you.
