Education: 5 steps of a strategic approach
A strategic approach is necessary for any entrepreneur to ensure the successful launch of a new product or service. This approach is broken down into five main steps: segmentation, attractiveness, competitiveness, targeting and positioning, which are presented in detail in this article.
1. SEGMENTATION
Segmentation allows the entrepreneur to identify the subpopulations that he or she will target. To segment this market and determine the subgroups most likely to buy his product or service, a manager must ask himself three questions:
Who is the customer? Who is the target audience? What categories of customers do I want to attract with my product?
What is the need? What is the need to be satisfied: What customer need does my offering satisfy?
What is the need to be met: what customer need does my offer satisfy? How? What product or service will I offer to satisfy the need: what is the best way to satisfy the customer need?
Segmentation is therefore about identifying homogeneous groups of customers based on their expectations and the criteria that distinguish them. This first step in the strategic process is crucial because segmentation gives the entrepreneur a fairly accurate idea of the typical consumer profiles he can target.
Note: The more precise the segment, the more homogeneous it is. This facilitates a commercial approach, but it also reduces the size of the target .....
There are three types of criteria for identifying homogeneous groups:
- Socio-demographic criteria: they qualify the customer by age, gender, marital status, profession, income level, place of residence, etc. They are very useful for segmenting customers.
- Psychological criteria: they allow you to better understand the personality of customers, their affections, interests and opinions.
- Behavioral criteria, which help identify the benefits that consumers are looking for when making a purchase (saving money, quality product, aesthetics, comfort, etc.).
Market research analysis consists of cross-referencing criteria to identify typical consumer profiles and segments.
After determining typical customer profiles, the entrepreneur chooses the segment(s) that seem interesting and that he wants to target. Market segmentation is the result of the intersection of customer criteria and expectations. A company must determine the expectations of each target segment and offer product features that meet consumer expectations and company goals. If I want to launch a new car aimed at large families, it would be very audacious to offer a coupe model.
Note:
To gather information to determine typical consumer profiles, you need to conduct quantitative or qualitative market research, or both, depending on your needs and resources.
Quantitative research to gather large amounts of numerical information and statistics
Qualitative research to understand customer behavior and expectations.
2. ATTRACTIVENESS
Attractiveness is the conformity of the product offered to market expectations. The product must meet demand by targeting a sufficiently mature market, i.e., a market consisting of customers who are ready to buy, who will be attracted by the characteristics and added value of the product. Thus, attractiveness lies between supply and demand; it links the product offered to consumers' expectations.
To anticipate the attractiveness of a product, it may be appropriate to look at the life cycle of similar offerings and thus understand the maturity of the market. There are many different types of life cycles.
However, most product life cycles follow the following path:
Launch: The product enters the market, requiring more investment than it pays off.
Growth: market share increases and the product begins to make a profit.
Maturity: market share is maximized, the product allows the company to finance itself, and it must think about the future (innovation, research and development, diversification into other activities, etc.).
Decline: the market share decreases, and with it the profit. Either the product continues to be profitable and self-financing, or it is time for the company to replace it with new, more innovative products.
The growth period is often the most profitable. A young operation requires more investment because it needs to be promoted, while a mature operation can provide a certain amount of self-promotion because of its prominence. A mature offering generates more margin, allowing the company to invest in innovation and thereby guarantee turnover in its business portfolio. A mature business funds the development of an innovation, which in turn becomes mature, and so on.
However, not all product life cycles are gradual. Fads, sudden loss of interest, and one-time hobbies have a significant impact on the product life cycle, creating forecasting difficulties in its development.
3. COMPETITIVENESS.
This stage of the strategic approach is to evaluate the advantages of the product offered in each segment by comparing it with the offerings of other players in the market. This allows you to determine the most competitive solutions in each identified segment and understand whether that segment would be more interested in quality, price, speed of service, geographic proximity, etc.
There are two ways to look at competitiveness: through the external environment and through internal resources.
Examining competitiveness through the external environment
The external environment determines performance. It involves identifying and implementing development strategies based on market opportunities and threats. Analyze the number of players and their size, the more numerous they are, the more competition, the presence of the firm also leads to strong competition.
Also, pay attention to new entrants at risk of capturing market share, and do not hesitate to invest in innovation to provide added value beyond the solutions offered by other players.
Exploring competitiveness through internal resources
A company's internal resources explain its success. The goal is to accurately identify the company's key activities, those that have a strong influence on its development and those that provide a competitive advantage (cost, quality, etc.).
This type of analysis is time-consuming to prepare and not very accurate; it leaves room for interpretation and, therefore, for errors in judgment. However, if the tool is used correctly, it can optimize the value-to-value ratio of an offer.
Note:
The BCG matrix is used to examine one's business portfolio and make appropriate decisions. This matrix allows you to classify a company's activities according to their maturity in the market and thus anticipate the actions to be taken (investments, innovations, product abandonment, etc.).
4. APPLICATION .
Based on the segments identified and the analysis of attractiveness and competitiveness, the entrepreneur determines the segments that will constitute his target market. This is achieved by aligning his offer with the expectations and means of the identified typical consumer profiles.
In order to select the segment to be favored, the entrepreneur must take into account:
- A large enough volume of customers in each segment to generate maximum turnover.
- Whether the potential customer has a real need. Whether the offer meets the consumer's expectations.
- The adequacy between the available funds (financial, technological, human...) and the expectations of the target market.
Note:
The SWOT matrix is a strategic tool that can help entrepreneurs looking for accurate goal setting. This tool allows you to analyze your strengths and weaknesses to choose where to focus your efforts. The SWOT analysis allows you to choose the type of strategy based on the balance of strengths as well as risks and market opportunities.
5. POSITIONING .
This last step in the strategic process is to determine the image that the company wants to give its products to customers. Each segment has different expectations for which it is necessary to position itself effectively by offering price, quality or any other form of added value that matches the expectations of the target customers.
Before positioning yourself, you need to consider:
- The expectations and needs of the target segments.
- Competitors' positioning.
- The added value of the product and the company's capabilities.
If the positioning is incorrect, the reaction of the target market will usually be direct: consumers will not buy a product that does not meet their expectations.
Marketing Mix
The marketing mix determines how a company will attack its target segments. This concept brings together all the marketing tools that a company must use to promote its activities. One of the most effective marketing tools a company must use to ensure its success is the so-called 4P (Product, Price, Place, Promotion) model
The components of the 4Ps are
Product: Technical, aesthetic and ergonomic features, as well as the product range in which it is marketed.
Price: Setting the price is a key element in the product launch strategy.
Place: (location, distribution): Determine which distribution channels will be used to sell the product (physical store, online store, shipping...).
Promotion: This element combines all communication activities to promote the product (posters, radio and television ads, newspapers, etc.).
Note:
Thus, it is a question of offering the right product, in the right place, at the right time and at the right price.
The right price is not necessarily the lowest, if you are a specialist in your field, it is important to define a psychological price, so as not to give the impression that you are offering "low class" services.