The S factor
The expression “marketing in a downturn” refers to an activity where budgets and prices are cut to counter falling demand; and is a popular option. Malcolm McDonald argues that it is, however, a misguided approach
There is overwhelming evidence that there is no country in the world where the low price segment of any market is greater than 10 per cent. “Primark!”, “Aldi!” and others, I hear you cry. Yet Primark has less than a half of one per cent share of the UK clothing market and Aldi has less than 5 per cent of the food market, so of course their results look dramatic at a time like this.
In contrast, look at the failure of Wal-Mart to oust Tesco from its pre-eminent position in grocery retailing. The reason? Asda has only one weapon – price – whereas Tesco has a deep understanding of its customers through sophisticated market segmentation.
Consider for a moment this real-life extract below from The Times:
Targeted customer
From Mr D. O. R. Mossman
Sir, I have received an insurance company leaflet which suggests that I could save over £200 on my car insurance. The small print then explains: “All price-saving comparisons included in this leaflet are based on a 44-year old female living in the Darlington area, with comprehensive cover but zero no claims discount, driving 12,999 miles per year in a 2002 Rover 25 1.4.” If she would like to get in touch with me, I will pass
the leaflet to her.
Yours sincerely
David Mossman
Lack of needs-based market segmentation, the bedrock of successful marketing, is the principal cause of failed business models. Indeed, in a recent Harvard Business Review article, lack of segmentation was cited as the cause of failure of 85 per cent of 30,000 new product launches in the US. And by segmentation I do not mean socio-economics, demographics, geo-demographics, psychographics and the like. After all, Bishops and Boy George are both As, but I doubt they behave in the same way – nor do all women between the ages of 18 and 24 and so on.
Juicy segments
This is not the place to spell out how to do proper market segmentation. Suffice it to say that there will be at least eight needs-based segments in the independent schools market.
Considerations for parents include, at the highest level:
• academic factors;
• enhancement factors;
• relationship factors;
• commercial factors; and
• cost factors.
But each of these can be broken down into at least a dozen sub-factors, such as under academic factors: personality and vision of the head; exam results; class size; league table position; academic success; subject choice; academic history; quality and experience of staff; teaching facilities; learning opportunities; innovation in teaching; and so on.
Multiplying each of the five main categories by twelve reveals at least sixty factors that parents take into account when deciding which school to select. There is a tried and tested methodology for reducing these micro-segments into about eight main segments, which then become the bedrock of marketing. Of these eight segments of parents based on their needs, price is only a minor consideration.
Spread too evenly
Without correct, needs-based segmentation, promotional efforts are “marmaladed” across the non-existent average parent. It is the “my head is in the oven, my feet are in the fridge, so on average I am quite comfortable” syndrome.
It is crucial to put needs-based segmentation at the heart of strategy-making in the independent schools sector. This way, by targeting segments based on each school’s distinctive competences, price will disappear from the equation and schools will soon be in a position to choose whom they accept, rather than asking parents to choose their school.
Emeritus Professor Malcolm McDonald is the chairman of six companies and works with the operating boards of a number of the world’s biggest multinational companies. He is also a judge for the Independent School Awards.
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