B station marketing rules!

Introduction:

If you base your decisions and goals on the needs and average level of the majority of your customers, you will fail.

—Philip Kotler

Today I would like to introduce to you one of the core links in the field of marketing strategy - market segmentation. Market segmentation, target market selection, and positioning. The combination of these three principles is abbreviated as STP, namely Segmentation, Targeting, and Positioning.

Market segmentation is the first thing that a company needs to pay attention to in its marketing strategy. Once you master market segmentation, it will be possible to innovate in your company's product track and then achieve growth. Let's first look at how the categories of mobile phones and watches innovate through market segmentation?

Three core links in the field of marketing strategy

Case 1: How mobile phones and watches innovate through market segmentation

Watches are a very mature category. If new entrants want to make a living in the watch market, they must explore completely new market segments. Companies usually segment the market based on usage scenarios (diving watches, sports watches), price (high, medium, low), customer gender (men's watches, women's watches), functions (electronic watches, mechanical watches, diving watches), etc.

The “S” in the name SWATCH stands for its place of origin, Switzerland, and also means “second-watch”.

Nicolas Hayek, the founder of Swatch, discovered that in addition to the above-mentioned dimensions, watches can also be used as clothing accessories, and no company had ever made clothing accessory watches before. Hayek further thought: Why do beautiful ladies change seven sets of clothes a week but only wear one watch? So he wants to launch clothing accessory watches to match different outfits.

People can own multiple watches at the same time just like they own fashion. This recognition has allowed the market competition scope, cognitive scope, and usage scenarios of watches to leap into a new area.

The concept of clothing matching will encourage customers to buy more watches, and the watch itself focuses on design, popularity and style. Timing is not the most important function. Swatch's design should be able to match the scene, color, thickness of clothing to reflect personal style. Watches have evolved from timekeeping tools to products that highlight personal style and fashion.

Swatch is not only a new type of high-quality watch, but also brings people a new concept: watches are no longer just an expensive luxury and a functional timing tool, but a "fashion and souvenir worn on the wrist."

Image source: Internet

Another company that is also conducting product innovation targeting niche markets is Transsion Mobile. As a mobile phone manufacturer in Shenzhen, Transsion is committed to providing consumers in emerging markets with their favorite smart terminal products and mobile Internet services. Its mobile phone brand accounts for nearly 40% of the market share in Africa, and it is a well-known Chinese technology company in the local communications industry.

The reason why Transsion mobile phones can occupy such a large market share in Africa is that it has innovatively improved its functions for the African market, grasped the pain points of African users in taking photos, and developed a photo mode exclusively for local people.

Most people love their phones’ selfie features, but people with darker skin tones have trouble getting clear portraits in low-light conditions.

Aiming at this point of the target market, Transsion has innovated its mobile phone cameras. The company's technical team collected a large number of photos of African portraits, analyzed their facial contours, exposure compensation and imaging effects, and used the eyes and teeth to accurately locate the face. On this basis, the exposure intensity was increased to improve the problem of photographing black people, so as to capture more details of African black people's faces and achieve results that satisfy consumers.

The technology used by Transsion allows mobile phone cameras to automatically track and brighten users' facial expressions when taking selfies, and automatically beautify the images, making photos of African faces have richer layers. Transsion's technology allows mobile phone cameras to automatically track and enhance users' facial expressions when taking selfies, and automatically beautify the selfies, making photos of African faces more layered. Through precise market segmentation and localization ideas, Transsion has developed photo and beauty modes that are more suitable for local users, allowing African users to have clear selfie images while discovering a market that has not been met in the past.

1. Definition of market segmentation

The concept of market segmentation was proposed by Wendell R. Smith in the mid-1950s. Market segmentation refers to the process of dividing the overall market into several homogeneous sub-markets based on differences in consumer characteristics, needs, desires, behaviors, habits, and scenarios through market research.

Young historian Dr. Yuval Noah Harari put forward an interesting core point of view in his book "Sapiens: A Brief History of Humankind": There were many human races in ancient times, but the main reason why our modern human race (referred to as modern humans) can survive in the cruel competition is because modern humans are able to "gossip", and the gossip here refers to the exchange of information. For example, after coming back from hunting, they can exchange some interesting information with each other.

"Gossip" itself is a kind of cognitive conflict and reconstruction. The exchange of virtual information within ethnic groups allows modern people to communicate some metaphysical abstract concepts.

For example, external macro goals can subtly motivate, including some inspiring ideas or visions. The rules of interpersonal communication that are naturally formed through continuous information exchange will often eventually evolve into an organizational value and culture. The distinctive items or commodities that come out of gossip eventually evolve into brands with cognitive bargaining power. The market that can obtain significant premium in the future through gossip becomes what we call the "capital market". It is precisely because "Bagua" has produced the reconstruction of cognition and new production relations that new productive forces have been generated. Therefore, Harari believes that cognitive reconstruction is one of the key driving forces of human evolution and productivity improvement.

Undoubtedly, the key to a successful marketing strategy also lies in cognitive reconstruction. As mentioned above, the three core elements of strategic marketing are: market segmentation, target market selection, and positioning. In layman's terms, market segmentation is to examine the opportunities in the original market with a unique perspective, classify them effectively, and finally cut out a market that has a competitive advantage for the company and choose it as the target. Choosing the market that is most beneficial to you is target market selection.

Positioning is to give the original products and services a unique value proposition that can reflect the difference from competing products and thus occupy the customer's mind.

Seth Godin, a famous American marketing expert and former vice president of Yahoo, wrote in his best-selling book "Purple Cow" that when you are tired of seeing a group of black and white cows on the green grassland.

Suddenly a purple cow appears, and your eyes will light up and you will feel completely different. Achieving differentiation through target market positioning, just like the Purple Cow, can make the company's product differentiation instantly apparent. Therefore, strategic marketing is about how the company views the market, what target market it chooses, and what unique value it gives to its products and services. We call it the design and reconstruction of market perception.

2. How to use market segmentation to achieve business growth?

Market segmentation plays a huge role in corporate marketing, which we will illustrate in detail through three cases.

Case 2: Louvre Tourism Growth Problem

In 2005, the Louvre Museum in France announced that the number of visitors that year had reached 7.3 million, compared with 6.7 million in 2004, and the growth rate of tourists has gradually slowed down. Therefore, the Paris city government invited many consulting agencies to study ways to significantly increase the number of visitors to the Louvre.

At that time, different consulting firms proposed different countermeasures. Some organizations have suggested increasing resource investment in emerging tourism markets, such as in Asia, especially in East Asia centered on China, by stepping up publicity efforts to encourage every tourist visiting France to visit the Louvre once or twice. Other organizations have suggested that the Louvre should be used in North Africa, for example, to encourage them to learn about French culture. Some organizations have also suggested upgrading and renovating the Louvre scene, turning the original visiting scene into a lifestyle retail scene, allowing more people to consume, drink coffee, and chat there. This is a new retail idea.

In addition, some organizations have suggested making the Louvre brand younger and allowing more new generations of young people to repeatedly visit the Louvre to study. They have proposed having popular French stars be the spokespersons to attract the new generation of young people.

The logic behind the above methods is similar, which is to increase the crowd, that is, to attract some new tourists to visit. Just as the Paris government was preparing to implement these recommendations, they received advice from another consulting agency.

They believe that making the brand younger and increasing market traffic is a good method, but it also costs a lot of money. For the time being, there is actually another way to quickly increase the number of visitors to the Louvre, which is to change the perspective and start with the existing stock. They suggested collecting data on the interests, hobbies, lifestyles, and visiting behaviors of those who frequently visit the Louvre. Then do a deep segmentation. For example, if some people are interested in weapons, we can organize a medieval weapons tour route specifically for this group of people. If someone is interested in biblical culture, a special biblical culture route can be set up in the Louvre, complete with explanations.

Finally, the Paris municipal government adopted an existing market reconstruction approach, and the number of visitors increased by 25% in the second year. If you think about it carefully, you will find that the thinking logic behind this strategic approach is market segmentation.

That is to say, the original market should be reorganized and divided to achieve market growth.

Case 3: Marriott Hotel Group’s path to industry leadership

The hotel industry is an example of an industry that uses market segmentation to achieve growth. Marriott Hotels Group is an international hotel chain. In 1985, the group managed more than 160 hotels with nearly 670,000 rooms.

As the parent brand, Marriott provides customers with excellent hotel services and has trained a large number of employees in the hotel industry. It can be regarded as the "West Point Military Academy" of the hotel industry in the United States.

Later, as the business developed, Marriott managers gradually discovered that customers had increasingly different needs, willingness to pay, and preferences for environmental enjoyment. If they only provided a process-based, standardized, unified product, they would lose many market opportunities.

Based on different travel purposes, customers' demands for hotels are very different. Some clients stay at the hotel for only one night; others, such as consultants, may stay for several weeks. Executives of multinational companies may even stay for more than a year.

Recognizing the differences in these customer needs, Marriott conducted a comprehensive strategic market segmentation and began to acquire new brands to serve different target market segments. For example, Courtyard by Marriott targets business travelers who always want moderate prices and some convenient facilities (such as gyms, restaurants, etc.), specifically for business travelers who are transferred for work or need to stay for a long time. It also includes Renaissance hotels and resorts, targeting an international clientele that prefers high-end facilities. Renaissance Hotels & Resorts caters to an international clientele that prefers high-end facilities.

The Ritz-Carlton serves high-end customers who demand location and luxury.

Through such segmentation, the original customer base is re-divided and cut. Provide products of different values ​​to meet the specific needs of each group of people. Through this market segmentation strategy, Marriott's overall business has grown significantly since 1985. Now, the number of guest rooms operated by one of Marriott's brands, such as Courtyard by Marriott, is more than the entire Marriott company operated in 1985, about 7 to 8 times more.

This case shows that market segmentation can help companies create differentiated products in an undifferentiated market. It can also help enterprises to allocate resources to the target market in a concentrated manner. Market segmentation can guide a company's product design, publicity, entire marketing strategy and positioning. Market segmentation is the cornerstone for enterprises to carry out marketing innovation and gain growth momentum.

Case 4: Bilibili challenges the Big Three video companies

According to statistics, as of May 2016, the cumulative viewing time of iQiyi had reached 2.07 billion hours, Youku Tudou was 1.32 billion hours, and Baofeng Video was 760 million hours. At that time, these were the top three in the online video field.

This market structure is very stable, and iQiyi's leading advantage continues to expand. Its viewing time is already close to the sum of the second and third place.

There is a "rule of three" in the marketing field: when regulations allow and there are no barriers to exclusivity (such as patents, licenses, and trademarks), the industry will eventually form a three-legged structure. Once a three-way competition is formed, it will be difficult for later competitors to survive. But in fact, there is a video company that finally succeeded in gaining a foothold in front of the three giants. This company is Bilibili (also known as Station B).

Bilibili's development benefits from its successful market segmentation and focused services on target markets. The customer base of the three video giants is highly similar, which leads to similar products. They cover a mass market. The core group that Bilibili targets is young people who like the two-dimensional world.

Image source: Internet

Bilibili was founded on June 26, 2009. One of its features is the real-time comment function (called barrage) that curls up above the video. This unique experience can perfectly satisfy the new generation's need for interactive sharing and is in line with the trendy culture of secondary creation. At the same time, it is also one of the birthplaces of many popular Internet words.

Bilibili has actually built a trendy cultural community, not just a video platform. Therefore, Bilibili finally stood out and broke the "three laws" mentioned earlier. One very important reason is the unique market segmentation.

Bilibili has extracted a specific group of people from the mass video consumption, or created a new group - the two-dimensional group, and built a pan-cultural community based on this group's hobbies, lifestyle, psychological and behavioral characteristics, age characteristics, etc., providing targeted video content.

In the first quarter of 2019, Bilibili had nearly 120 million monthly active users, more than 510 million video views per day, more than 1.4 billion barrages, and more than 10 million original submissions. The average age of users is 17, and 75% of users are under 24 years old.

Through the above cases we can see the importance of segmentation. Segmentation is the most critical part of marketing. So although today's Internet field, including traditional enterprises, has been talking about positioning, but if we go back to the overall marketing logic, it should be segmentation first, then target market selection, and finally positioning. Without segmentation, accurate positioning is impossible. There was no chance of implementation, and in the end all that was obtained was a slogan for self-entertainment.

Summarize

The essence of market segmentation is to help companies reconstruct their original markets, or find new markets and growth points. Without market segmentation, it may not be possible to focus on precise customers. Then the products and services provided by each company will be no different from those of its competitors, and latecomers may not have any chance to gain a foothold at all. Therefore, a good company does not depend on its own infinite strength, but on the ability to choose a market that is beneficial to it. Market segmentation is the means and tool for choosing the battlefield.

Through the above cases, we can see the importance and role of market segmentation. Market segmentation is the cornerstone of marketing. Although the concept of "positioning" is deeply rooted in people's minds, but returning to the overall marketing logic, companies must first have market segmentation, then target market selection, and finally effective target market positioning.

Author: Kotler Marketing Strategy

Source: Kotler Marketing Strategy (kmg1981)