Understanding segmentation targeting positioning and

differentiation

A marketer's job is always fraught with difficulty. How to make a "purple cow" (something remarkable) out of a "pink sow" (something ordinary) seems to be the perpetual task of the marketing arm of the firm. (In today's marketing environment, a firm must be remarkable just to get some attention, hence the "purple cow" analogy.)6 The chapter introduces some of the basic concepts of modern marketing and applies them to marketing green buildings, including design services, construction services, technologies and products. Segmentation, targeting and positioning are often referred to as the "STP" formula and form the essence of strategic marketing planning, as inputs to marketing differentiation. Figure 9.3 shows how these four activities are interrelated.

► 9.3 Segmentation, targeting, positioning and differentiation.

► 9.3 Segmentation, targeting, positioning and differentiation.

Positioning And Differentiation

Segmentation

Marketers are always trying to understand and segment markets to focus on the most profitable or available segments. Segmentation variables can include considerations of demographics, geographies, firmographics, psychographics and similar issues. In demographics, the focus is on the social and economic characteristics of buyers (age, income, race/ethnicity, income, etc.); so far there is little evidence that this approach to segmentation is useful for marketing green buildings. (However, one could argue that those states that are more liberal politically are likely to contain a higher number of "change agents" who would be in favor of green buildings, so that in fact socioeconomic characteristics of buyers and decision-makers may be relevant; however they are contained already in the geographic category.)

In geographic segmentation, the focus is on where people are locating and building; as we saw earlier, there is plenty of evidence that green building activity is still concentrated in relatively few places in the US at this time, such as the West Coast, Mid-Atlantic and Northeast states, with other nodes in the large

Table 9.3 LEED registrations (all systems) per state (selected), as of April 1, 20077

State

2007 LEED Registrations

2006 Population (Millions)

LEED Registrations per Million

Oregon

217

4.6

47

Washington

296

6.4

46

Massachusetts

184

6.4

29

Maryland

131

5.6

23

Pennsylvania

285

12.4

23

California

813

36.5

22

Colorado

104

4.8

22

Michigan

193

10.1

19

Arizona

114

6.2

18

Illinois

230

12.8

18

AVERAGE

5,300

300

17.7

New York

338

19.3

17

New Jersey

149

8.7

17

Georgia

135

9.4

14

Texas

203

22.1

8

cities of the South and Southwest, as well as the Upper Midwest. The number of LEED project registrations by state, measured against the population of the state would be the first place to look. On this basis, considering 14 representative states with at least 100 LEED-registered projects (roughly the average number of registrations per state at this time), examine the results shown in Table 9.3. The average number of LEED project registrations (for all systems) was about 17.7 per million (300 million people and 5,300 project registrations), as of April 2007. The 36 states not shown in the table would each average about 50 LEED-registered projects, as of April 2007.

Therefore, geographic location is certainly a prime variable to consider in deciding where green building services can be successfully marketed.

Firmographics is a newer term, coined for business-to-business marketing. The essential elements in firmographics are such variables as the size of the firm or organization (in terms of revenues, number of locations, number of employees, etc.) to which one is marketing; private, public or nonprofit entity; industry type (higher education, commercial offices) and similar characteristics. Data from Chapter 2 show that LEED registrations are prevalent among public entities (31 percent of the total project area), institutions (schools and colleges, hospitals, etc.) and nonprofit groups (17 percent), taken together about equal with the 48 percent of total area of corporate project registrations.

Psychographics refers to segmenting by lifestyle, propensity to take risk or willingness to tolerate ambiguity in potential outcomes. In this classification, a marketer would look for someone with a risk-taking personality, people considered as industry leaders, innovators (in the "diffusion of innovation" sense), as surrogates for early stage segments.

Targeting

Targeting is the essential task whereby marketers decide to focus on one or a few segments. In the case of architecture firms, most specialize in one or a handful of client types (public, private, nonprofit) project size and market segments (e.g., K-12 education, museums, libraries, urban offices, historic preservation and adaptive reuse, healthcare, etc.), so the choice of targets is necessarily limited by the firm's prior experience. Many firms aim to take greater market share in a given industry or else extend the geographic reach of their success in tackling a certain type of client, but most firms focus on current relationships. The more design-oriented the client, the easier it is in general for a smaller "high-design" firm to extend geographic reach. Many small design firms successfully work on national and even international levels, typically by teaming with a larger local architecture or engineering firm that will provide construction documents and construction supervision. For green buildings, architects and builders who have built an early reputation and history of successful projects are often invited to compete for projects far from home, and they are often successful in doing so.

Prime targets for green building marketing at this time share these characteristics: they are early adopters of new technology; they may be potentially significant users of a new approach (i.e., they control multiple properties); they may be influencers or opinion leaders (able and willing to sway others, both inside the organization and in a larger community of peers) and they can be reached at low cost (e.g., already clients of a firm or customers for a product).

Positioning

Positioning is the third activity of the STP (Segmentation/Targeting/Positioning) formula. It takes segmentation and targeting analyses and turns them into messages that go out to clients and prospects. A textbook definition of positioning is "the act of designing the firm's marketing offering and image so that they occupy a meaningful and distinct competitive position in the target customers' minds."8 In other words, positioning is a communications activity that aims at changing the view of a firm in the mind of a target prospect, in such a way as to create a "difference that makes a difference, to someone who makes a difference (to you)." These differences have several important characteristics. They need to be:

• important (in terms of benefit delivered);

• distinctive (something that not every competitor can claim);

• superior (to other ways to get the same benefit);

• communicable (and somehow visible to prospective clients or buyers);

• pre-emptive (not easily copied by competitors);

• affordable (there is little price difference to get this superior benefit);

• profitable (the company finds it profitable to be in this market segment).

Firms that have positioned themselves successfully as green building experts (through publicizing individual efforts as well as project successes) have found that it is possible to maintain their positioning even as more firms try to emulate them.

Examples would be firms with certified LEED Gold or Platinum projects or those making the annual Top 10 list of the AIA Committee on the Environment.9 Positioning, then, is what a firm does to take real facts and position them in the minds of the targeted prospect; positioning deals with creating and managing perception. In marketing green buildings, positioning is an essential component of a firm's communications strategy and needs to reinforce a single powerful message. Because it is a new industry, green buildings offer the positioning strategy of grabbing a new unoccupied position that is valued by clients and prospects. For example, a firm could claim "the most LEED-registered projects" in a given industry or location, or "the most LEED APs," or "the most LEED Gold projects with a certain product or technology" but then would also have to explain why this is a benefit to a client.

Table 9.4 shows some types of positioning strategies with examples of firms that use them. This list of potential positioning strategies makes it quite clear that most firms in the design and construction industry have no clear positioning. Therefore they have to compete on their experience with particular building types and their fees. As a result, most design firms have trouble making sufficient profits to grow and to attract major talent from the outside. Many construction firms, especially those in "hard bid" public-sector environments, have similar issues.

Figure 9.4 shows hypothetical positioning situations that might exist for various firms in the green building industry. While the chart refers to design firms, product manufacturers and construction firms also need to construct effective positioning maps, in terms of how they want clients to perceive their product

Table 9.4 Strategic positioning for design firms10

Strategic Positions

Representative Firms

The best

Saks Fifth Avenue, Accenture Consulting

The best value

Hyundai, Schwab (as a discount broker)

Lowest cost

Southwest Airlines, Jet Blue

Innovation, pioneer

Boeing, Bank of America, Schwab, Frank Gehry,

Thom Mayne and OMA (architects)

Product focus

Aamco (transmissions)

Target-specific segment

Gerber (baby food)

Product categories

Gatorade, Oracle

Product attributes

Volvo and Michelin (safety), Crest (whitens)

Product line scope (has everything)

Amazon.com; Barnes & Noble

Organizational intangibles

H-P, Kaiser Permanente (healthcare)

Emotional benefits

MTV, Hallmark Cards

Self-expressive benefits

GAP, Mercedes

Experience of buying/using the product

Nike, Nordstrom

Personality of the brand

Harley-Davidson, Tiffany

and service offerings, using attributes that make a difference in target-market decision-making. Unless positioning is a conscious effort, it will be imposed on a firm by default.

Differentiation

Differentiation is an approach to marketing strategy that takes the STP variables and focuses them on particular markets. The differentiation approach to marketing strategy was first popularized in the 1980s by Harvard Business School Professor Michael Porter and must be coupled with a specific market, geographic or other focus.11 In the architecture, engineering and construction professional service industries, the main differentiators for sustainable design are highly qualified people, satisfied clients, high levels of LEED attainment, specific industry and project experience, and the ability to deliver green building projects on conventional budgets. A firm usually needs to show high levels of attainment on the key variables to win major new projects in typical highly competitive situations. Case in point: in 2004, a small ($5 million) green public works project north of Seattle, Washington, attracted 24 serious proposals!

A highly acclaimed and seminal work from the 1990s, The Discipline of Market Leaders, points out that every firm needs to excel in one of three key areas

ing map for design firms (hypothetical).

position-

ing map for design firms (hypothetical).

Positioning Map Swa

of differentiation: customer intimacy, product differentiation and operational excellence, while providing at least good service in the other two areas.12

1. In the area of professional services, clients most expect intimacy in the form of established and continuing relationships between clients, architects and builders. Green building marketers therefore need to focus considerable attention on relationship management and the quality of experience working with the firm on green building projects.

2. Firms need to display operational excellence in terms of meeting building program requirements, budgets and schedules, while achieving specific LEED goals. Creating high-performance buildings on a conventional budget should be the goal in this area.

3. Firms that have a "signature" technological approach can often attract clients who are willing to try new firms who exhibit product leadership in key areas of sustainable design.

In her book, Marketplace Masters, Suzanne Lowe outlined key differentiation activities for professional service firms.13 Her Top 10 approaches that work for design and consulting firms are those in which the firm:

1. Conducted an advertising campaign (to establish/maintain positioning).

2. Added new (to the firm) services that blend into the services of another industry (e.g., a consulting engineering firm adding facilities management services).

3. Implemented a formal relationship management program to strengthen the bonds with current clients.

4. Merged with another firm, to strengthen the firm's capabilities and reach.

5. Managed a public relations campaign (to highlight achievements/reinforce positioning).

6. Extended the firm's services via joint ventures, alliances or referral networks.

7. Added new services to the firm within the currently served client base.

8. Created a new visual identity (yes, this does work!).

9. Hired specialized, key individuals.

10. Improved or evolved the firm's current services.

Within this list, design and construction firms can find one or more approaches to immediately differentiate their services in the green building industry. Leading firms are particularly adept at using differentiation strategies 1, 5, 8 and 9. Improving or evolving the firm's services typically takes place over the course of multiple green building projects and several years.

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