Evaluation

Data from sales, profit, etc. used to evaluate the progress and success of the strategy and
to inform of changes to the strategy in the light of that data

An assessment of how an appropriate strategy has been developed for the

situation faced by Business X, utilising segmentation-targeting-positioning
strategy.
(748 words)

Drummond et al. (2008) state that “the notions of competitive advantage and marketing
strategy are intrinsically linked”; competitive advantage being the process of identifying a
sustainable basis from which to compete, and the marketing strategy aiming to deliver this
advantage. It can therefore be said that the organisation's competitive advantage strategy
underpins all other strategies; fundamental to the organisation's bigger picture. (See
Figure 9: Competitive Advantage matrix adapted from Porter, 1980)
Business X's 'focused differentiated' strategy appropriately puts this small company in a
narrowly defined market (away from the mass market environment), focused on attractive
segments where the 'Fitted Garage' product can be differentiated on quality; distinct from
competitors.
This strategy demands that customers are served uniquely well, enabling the organisation
to build strong customer loyalty and powerful referrals that should deter competitor
challenges.

The link between products and markets is made through Ansoff's approach which
McDonald (2005) states 'describes the four possible combinations of products and markets,
or the four categories of marketing objectives', corresponding to the 'level of risk the
company has to manage.' (See Figure 10: Ansoff's Matrix)
In view of the fall in demand Business X has identified as being less product-specific and
more about a decrease in the number of leads/sales, a market penetration strategy is a
low risk commitment that is appropriate to increase sales of existing products. As Beamish
and Ashford (2006) identify, this strategy means that the organisation will need to
'demonstrate a high level of competitive force' through hard-hitting promotional activity.
The broader scope of this strategy being: to win customers from competitors, and to test
out the power of buyers and their willingness to change. However, Business X also
understands that this is still a largely untapped market, and therefore a greater marketing
penetration by promoting to its segmented market will invariably create a greater market
share.

Differentiation is central to Business X's marketing strategy response to the change in

demand, not least to differentiate from the competition but also to send out a clear
message to the most appropriate consumer marketplace. McDonald (2007) rightly claims:
“the truth is that very few companies can afford to be “all things to all people”, and as
such market segmentation allows the organisation to 'target its effort to the most
promising opportunities'.

Business X's segmentation-targeting-positioning (STP) strategy identifies two segments

within the market (wealthy homeowners and luxury car owners) that are not price sensitive
and are attractive segments in terms of profitability, rate of growth, predictability and
competitive forces. The organisation knows these to be appropriate consumer segments
for the Fitted Garage as key findings from customer profiling data has identified them as
such. The organisation also makes a point of talking to its customers, and is therefore
aware of many of the behavioural and psychographic segmentation variables. As such, the
choice of segments is a combination of the abovementioned factors as well as being a
market-orientated approach that identifies the consumers' needs in order to adopt a
benefit-led approach to targeting them.
E.g.

Averag
Annual Average Product Benefit
Market Segments e Age
Income Sale Focus
range
Organized, tidy &
Proud home owner £100k + attractive garage – as
35 - 45 £4 – 5k
husband & wife combined beautiful as the rest
of their home
Attractive garage to
Luxury car enthusiast
suit car(s) & create a
husband 45 - 55 £100k + £5 - 10k
“professional looking”
workshop
Table 1: Business X's targeted market segments

Taking into consideration market conditions and the organization’s goals, the targeting
strategy is the result of analyzing the segments to make sure they are consistent with the
organization’s capabilities so that a sustainable competitive advantage can be built.
Drummond et al. (2008) also prescribes that the segments be “compatible with the wider
organizational issues”, so the impact of these segment choices has also been considered in
relation to the internal structure of the organisation, particularly the reporting lines and
processes.

Figure 11, the organization’s perceptual map shows Business X's position in relation to
competitors; illustrating the fundamental positioning strategy with a view to addressing on
what basis the organisation will compete in the chosen segments. The map establishes the
current situation so that gaps/ alternative positions in the market are clearly visible.
Therefore Business X's strategy to build on its current position by creating a differentiated
consumer perception consistent with fulfilling the segments' benefit-led needs, is a
calculated decision.

All strategic decisions, whether product and market in nature, require a great deal of
considered analysis and thorough evaluation, and the same approach has been adopted to
ensure an appropriate STP approach. Particularly in light of the change in demand, the
importance of having sustainable advantage strategies cannot be underestimated for
Business X – not least to ensure a clear direction, but also to ensure this is 'appropriate to
the position occupied, relative ambition and resource base' - as Drummond et al (2008)
identifies.
2.3 Assess how an appropriate strategy has been developed for the situation faced by VGI, utilising
segmentation-targeting-positioning strategy.

The STP process was utilised to inform the strategy outlined above to respond to the decrease in market demand
faced by VGI. A brand portfolio approach will be adopted in 2010 to best serve each of the segments to be
targeted, as described below.

VGI understood that marketing to everyone throughout EMEA who needs or wants car hire would be a huge
undertaking and a vastly inefficient use of scare resources. It was therefore decided to segment the market based
initially on geographic location and then on consumers’ purchase behaviour rather than on demographics, socio-
economic or other segmentation characteristics. An analysis of the market showed that there are a number of
different groups of customers across each country in the EMEA region that share similar needs and can be
grouped into the following segments, as shown in Section 1.2.3: -

- People who rent domestically in their country of residence

- People who need a replacement vehicle whilst their car is being repaired/serviced
- People who rent abroad
- People who rent for business purposes
- 27 -
- People who rent for leisure purposes

Each of these segments meets Dibb and Simkin’s (2008:74-75) conditions for effective segmentation, which state
that each segment must be measurable, substantial, accessible, stable and useful. After looking at the purchase
behaviour patterns of each of these segments it was decided to further segment the third category into those
people who travel from their country of residence to the USA and Canada and target them for the following
reasons:

- The average order value is much greater

o Renters typically need a larger car for a longer period of time when travelling to North America
compared to domestic in-country rentals that tend to be for smaller cars for a shorter period such
as the weekend
- The margins and ROI potential are better due to the higher average revenue per rental
- Fuel is cheaper in North America compared to Europe, which helps maintain a higher margin
- There is more fleet available so the risks of selling out are lower
The 2010 strategy to respond to the change in the external marketing environment was developed by drawing up
bespoke communications plans and marketing mixes to complement each of VGI’s two brands. A differentiated
targeting strategy will be followed for Alamo and National as opposed to an undifferentiated or concentrated
strategy because of the brands’ existing positioning in the market. This type of strategy does have its
disadvantages, namely it will require more resources to implement than if it was an undifferentiated one,
economies of scale will also be lost as similar efforts may have to be duplicated and additional costs may be
incurred. However, as the situation analysis explained in Section 1.2.1, VGI is operating in a market that is in
decline by around 20% so all marketing expenditure has to be used effectively and efficiently.

In terms of positioning the brands, Appendix 1 highlighted the challenge that both brands’ vehicle fleets are exactly
the same and both brands operate out of the same network of branches in the USA and Canada; the majority are
dual-branded so even the staff are the same. However, the Alamo brand is positioned in the market as the lead
B2C leisure brand of choice for EMEA travellers renting on holiday in North America. Its agreement with Disney to
be the official car rental partner at the theme parks reinforces this view. It is known for having a strong network of
branches on-airport at all the major hubs such as Orlando International and LAX. The Alamo brand also has
focussed communications through its channel partners, such as High Street travel agents like Thomas Cook and
Thomson. This is where the customer segment identified above will typically book a two-week family holiday to
Florida with the children to visit the theme parks. The strategy is to carve out a distinct position relative to the
competition, with an unrivalled service offering; at Orlando International there are 18,000 Alamo vehicles in peak
periods, the largest fleet by far of any car rental provider there.
- 28 -

Conversely, National is positioned as a strong car hire player for domestic rentals within the UK. The marketing
plan does not recommend a repositioning exercise to try and change consumers’ perception of National to being a
brand aligned with North America. In a market with declining demand, this might prove a futile way to use scarce
marketing resources. Instead, it will serve as the B2B brand, servicing those customers who travel to places such
as JFK for business purposes, and are existing customers in their countries of residence. In terms of matching the
brand to identified needs and wants of this type of customer, it will have a different value proposition to that of
Alamo; the focus will be on speed, efficiency of transaction, for frequent business renters who know the drill.
Customer retention is also key, and a price premium will be charged for this.

The strategy underpinning the marketing plan will be to position the brands as being able to satisfy the functional
and emotional needs of the customers. For Alamo the functional aspect to be focussed on is price: Alamo will
remain the cheapest of the big brands. The emotional positioning will come with the strap-line “Drive Happy”. For
National, the functional positioning will be the expedited service of conducting the checks on the driver license and
car etc so as to get the typical business renter on the road as quick as possible. The emotional positioning will
reinforce the message that they are important people with more important things to do than wait in a queue to get
the keys for the car. This will play to their emotional needs and encourage customer retention; an important part of
the B2B market.