Segmentation and positioning
A case study of

Bang & Olufsen

Segmentation and positioning – Bang & Olufsen

Table of contents

1. Introduction ............................................................................................................................ 2

1.1 Problem Statement .............................................................................................................................................................. 2

1.2 Methodology .......................................................................................................................................................................... 3

1.2.1 Data gathering .................................................................................................................................................................... 3

1.3 Delimitation ............................................................................................................................................................................ 4 2. Bang & Olufsen ........................................................................................................................ 4 3 Segmentation ........................................................................................................................... 5

3.1 Determining the consumer ............................................................................................................................................... 5

3.2 B2C Segmentation criteria’s ............................................................................................................................................. 6

3.2.1 Gallup compass ............................................................................................................................................................. 8

3.2.2 Minerva ............................................................................................................................................................................ 9

3.2.3 Conzoom ....................................................................................................................................................................... 10

3.3 The advantages of market segmentation ................................................................................................................ 12

4 Choice of target ...................................................................................................................... 14

4.1 SMUK ....................................................................................................................................................................................... 14

4.2 Evaluating market segments ......................................................................................................................................... 15

4.3 Target marketing strategies .......................................................................................................................................... 17

5. Conclusion ............................................................................................................................. 18 Reference list ............................................................................................................................ 20

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Segmentation and positioning – Bang & Olufsen

1. Introduction

How does a company keep its key customers? The company needs to understand the customer´s preferences in relation to the product. The preferences can be found by finding similarities among the customer´s and then create segments of these consumer´s. Segmentation is about constructing these consumer groups with similar preferences towards the company´s product (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007).

Other people might say that segmentation is dead, because nowadays consumer´s shop depending on their mood, which makes it harder to classify them. The consumers may nevertheless, still have some similarities i.e., they are women/men or read the same newspaper (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). The segmentation theory is available and ready for companies to use. To help explain the segmentation models I have chosen a product to help with the understanding of the theory. I have selected Bang & Olufsen´s new television Beovision 11.

Bang & Olufsen introduced their new television, Beovision 11, to the world press on the 12th of October 2012. The new television is the 11th in the Beovision line and Bang & Olufsen´s new flagship. B&O has produced a television with high quality, design and great sound. The Beovision also has a lot of other new features, which will be described later on (http://ekstrabladet.dk/kup/elektronik/teknologi/article1844090.ece).

1.1 Problem Statement

The paper is an analysis of Bang & Olufsen´s opportunities to segment and target their marketing to the right consumers of the new Beovision 11 in Denmark. The report will include segmentation considerations that could be useful for Bang & Olufsen. Furthermore it will give recommendations about segmentation and targeting for Beovision 11.

Some research questions have been made in order to help answering the How can Bang & Olufsen use segmentation and targeting when it comes to reaching the right consumer of Beovision 11? • • What kind of segmentation and targeting models could Bang & Olufsen use? What kind of advantages may Bang & Olufsen receive from segmentation? 2 problem statement: •

Segmentation and positioning – Bang & Olufsen

1.2 Methodology I will start the report with a small introduction to Bang & Olufsen and Beovision 11. To answer the problem statement the paper is build up around the SMP model, which means segmentation, choice of target and positioning. The model is used when determining a company´s marketing strategy. First the company starts by classifying the market in segments. In the segmentation part there are four processes: determining the market, analysing the market, creating segmentation criteria’s and profiling the criteria´s (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). I will go through the segmentation by using these methods and models: determining the consumer, segmentation criteria´s and end up by discussing some segmentation advantages. When analysing the segmentation criteria´s I will describe the overall criteria´s and elaborate with segmentation models like Conzoom. There are three steps when it comes to choosing the target: analysing the segments, choice of segment and choice of marketing strategies (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). I will use the SMUK model to analyse the chosen segments, then I will choose a segment and finally select a target marketing strategy. The report will end up in a conclusion where the most important analysing points will be summarized.

1.2.1 Data gathering The main sources of theory are textbooks made for higher education purpose and mostly written by professors. I therefore consider the material very useful and with a high credibility.

Another reliable source is academical published articles. I use some of those and I have used Bang & Olufsen´s annual report from last year. The annual report is consider them very trustworthy. the communication from B&O to the rest of the world about their situation. I am a little critical because they may want things to look a bit better than they really are.

I have also used newspaper articles, which is a bit more unreliable. Newspapers are after all made to sell so they might not be all that accurate. 3

Segmentation and positioning – Bang & Olufsen

1.3 Delimitation

According to the SMP model you have to analyse the market in the segmentation part. A market analysis consists of analysing a lot of consumer´s preferences and come up with criteria´s (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). This could have been done with a questionnaire and a cluster analysis of the responses. Due to the long process of creating these data, I have chosen not to do so. After all this report is about marketing and not about statistics.

The SMP model consists of a positioning analysis, but this paper will not include any positioning part. I have chosen to exclude it because of the length of the paper. The length does not make it possible to include the whole SMP model. I have chosen Minerva and the Gallup compass as segmentation models. I have done so because Gallup is an expansion of the RISC model while Minerva is a reversed version of the RISC model, so with those two models I cover all three of them. A very popular psychographic model is the American produced VALS. It segments American adults by values and lifestyle (Kotler & Keller, 2012). The report is about segmentation in Denmark and for that reason I have chosen not to include the VALS model. When discussing segmentation another consideration is, what comes first the product development or the segmentation? The Bang & Olufsen Beovision 11 is not the first product in this series, so it could be argued that B&O might already have a segmentation profile of the product. B&O furthermore consider themselves as creating differentiated products, which may also already influence their segmentation. For the purpose of this report I have chosen to analyse Beovision 11, like it was produced and then has to be segmented.

2. Bang & Olufsen The company Bang & Olufsen was founded in 1925 in Struer, Denmark. Today B&O have over 2000 employees and more than 1000 dealers in over 100 countries. Around 70% of the stores are dealers who only sell Bang & Olufsen products, and these stores account for 82% of the

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Segmentation and positioning – Bang & Olufsen

total turnover. B&O produce exclusive televisions, telephones, loudspeakers and so on (http://www.bang-­‐olufsen.com/en/the-­‐company/heritage). Bang & Olufsen´s values are passion, pride and persistence. The passion is seen in everything they do which help in creating magical customer experiences. The pride is realized in setting new standards and continuing to bring customer´s the best experiences. B&O´s persistence is in the commitment of building a healthy and sustainable business (http://www.bang-­‐olufsen.com/en/the-­‐company/heritage/our-­‐values). Bang & Olufsen is a niche player in an industry run by big international corporations. B&O differentiate themselves by using design, quality and innovation. The company has positioned themselves as a supplier of luxury goods (Bang & Olufsen, 2011). Beovision 11 Beovision 11 is Bang & Olufsen´s new flat screen television. Beovision 11 tries to combine great television picture with high quality sound. Among the new features in the smart-­‐TV are 3D technology and a new picture function called 360° Automatic Picture Control. Beovision 11 is only available in Bang & Olufsen stores. A 46-­‐inch screen costs 59.995 DKK. Beovision 11 has the characteristic Bang & Olufsen design. It is kept very simple and goes with the elegance that is in the B&O universe. The Beovision 11 can stream music from a smartphone and has wireless Internet access (http://ekstrabladet.dk/kup/elektronik/teknologi/article1844090.ece).

3 Segmentation

Segmentation is to take a market of customer´s and split them into groups or segments with the same preferences or similar needs (McDonald & Dunbar, 2004). I start the segmentation part with determining the consumers for Beovision 11.

3.1 Determining the consumer Determining the consumer is a matter of identifying the consumer or organisation that can use your product. This includes having the technical capacity to use the product. It derives questions like, which market are we in the B2C or B2B? The firm has to 5

Segmentation and positioning – Bang & Olufsen

choose whom they target and make some market restrictions (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). Almost all Danish people have the technical capacity to use Bang & Olufsen´s Beovision 11. It is used like a normal television and it only requires power. If the technical capacity does not disclaim any customers the price definitely will. It is not so much about who can use the television but more about who can afford it. As written above Beovision 11 is only sold in Bang & Olufsen stores. B&O are selling their own televisions without help from any other sales channels and therefore I have chosen not to talk about a business-­‐to-­‐business market. For the purpose of this report the Beovision 11 is in the business-­‐to-­‐consumer market. Now the consumers have been determined its time to look at different segmentations. Creating segmentation criteria´s will help Bang & Olufsen targeting the right consumers.

3.2 B2C Segmentation criteria’s The segmentation criteria´s are used to split people up in different groups with similar preferences. It is important to categorize the most relevant criteria´s, so the consumers buying behaviour is best described. There are four segmentation criteria in the business to consumer market: geographic, demographic, psychographic and behavioural (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). Geographic Geographic segmentation like the name applies has to due with segmenting the markets geographically. This can be done in different ways i.e., by country or neighbourhood´s. The marketing can then be aimed directly at people in specific locations to improve targeting the exactly correct ones (Kotler & Keller, 2012). Bang & Olufsen might be able to use the segmentation of neighbourhoods within the Danish country. This could ensure that they target the correct people in a specific area. The high prized Beovision 11 may be more attractive in richer parts of the country and there

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Segmentation and positioning – Bang & Olufsen

are definitely geographical areas that are wealthier than others. As an example B&O could target Risskov here in Aarhus. Demographic Demographic segmentation divides the market in gender, age, family lifecycle, income and occupation (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). In the demographic segmentation the consumers needs and wants, due to their position in life, is described. This makes it very popular when choosing segmentation criteria´s (Kotler & Keller, 2012).

Bang & Olufsen can use this in their segmentation criteria´s. The age of the segmentation plays a roll when it comes to Beovision 11, since the price is high the younger customers probably cannot afford it. B&O are better of going after customers with higher income. Occupation and income are a bit similar, and B&O can target people after the occupations with the highest income.

Psychographic The psychographic segmentation criteria consist of three factors: lifestyle, beliefs and personality. These are used when it is not enough to segment markets by geography or demography. A psychographic segmentation model, which will be discussed later on, is the Gallup compass (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007).

Having a house with a Bang & Olufsen Beovision 11 sends out a special image about quality, design and that it is expensive. Lifestyle and personality can help explain, what kind of people care about sending out these values. The Beliefs of the targeted segment can help determining where to advertise. If the consumers know that Bang & Olufsen is a luxury good, this might get some people to buy it.

Behavioural The three beforehand-­‐described segmentation criteria´s determine the consumer’s behaviour (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). Behavioural segmentation implies the consumer´s attitude towards, use of and knowledge about the product (Kotler & Keller, 2012).

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Segmentation and positioning – Bang & Olufsen

Bang & Olufsen have been around for a lot of years, so I think people know the

products and have a certain attitude towards it. It might be possible for B&O to use the positive attitudes to get some customers. B&O may even have consumer´s who a loyal towards the brand and the products.

It is not enough to use only one of these criteria´s, because many criteria´s influence the purchase. The criteria’s are multidimensional and include needs, benefits and prior experiences (Neal & Wurst, 2001). For Bang & Olufsen it is not enough to look at the four segmentation criteria’s alone, but they have to combine them in order to get a better understanding of the consumer´s needs. A critique of the model is that there is other segmentation criteria´s like: distribution, media and our time segmentation (Thomas, 2007). The critique suggests that there are also other criteria´s that could be include in a deeper analyse. Segmentation models have been made to describe people in different segmentation criteria´s. In the following, some segmentation models that include criteria´s from all four categories above will be used.

3.2.1 Gallup compass

The psychographic segmentation criteria´s are combined in a Danish segmentation model, the Gallup compass. On the horizontal axis it chooses between unity and the individual and on the vertical axis it is the traditional vs. the modern. There are 9 different categories in the compass. The Gallup compass is a tool for companies to aim their marketing against the right group of people or segment (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). The Gallup Compass is criticised for the way it separates the segments. It is a to broad model where it can be really hard to determine in which segment a consumer is. The Gallup compass takes the four colours of the RISC model and divides them into eight. More and more of the consumers become individually oriented and can afford to buy their own desires. This makes it harder to form larger segments where all consumers fit. CRM is a result of customers more individual purchases (http://www.berg-­‐marketing.dk/livsstils_segm.htm).

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Segmentation and positioning – Bang & Olufsen

One category sticks out when it comes to Beovision 11 and that is the one called

modern. The modern category is placed to the northeast, which combines the modern and the individual. People in the modern category are described as wealthier, having the newest technology, big cars, reads Borsen and plays golf or tennis (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). Bang & Olufsen could definitely try and target this segment. To me it seems like the people in it would enjoy the prestige that comes with the Beovision 11. It can be seen together with the need of a big car. The group is up to date with the technology of the new television and its new features. The group also have the finances to buy the television without to much decision-­‐making. I think this group would be the obvious segmentation selection for Bang & Olufsen.

3.2.2 Minerva

The Minerva model and the RISC model are pretty similar and the only differences are the changed axis. The analysing institute AIM Nielsen makes the Minerva model. The horizontal axis describes pragmatic vs. idealistic and the vertical axis modern vs. traditional. The model has five categories: the blue, the green, the rose and the violet segment. The middle category (grey) is underrepresented in society and will therefore not be used. The blue segment is characterised by these values: individualistic, modern, prestige, influence and visible success. The green segment is described as value oriented and with focus on culture, education and family life. The key features of the rose segment are: traditional, family, friends and community. The violet segment is characterised by individualistic and traditional values (http://dk.nielsen.com/products/downloads/Markedsinformationer/MarketMonitor/ENG/2 006/Engelsk%20udgave%202.%20kvartal%202006/MinervaSnapMonitorACNENG.pdf). Consumer´s shop after the mood they are in (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). The Minerva model does not take this into consideration. If the consumer´s purchase changes because of the mood, it will not be possible to acknowledge this in the Minerva model. The creater of the Minerva model Henrik Dahl now considers the model to be very superficial. He says that people no longer carry around their social heritage, which 9

Segmentation and positioning – Bang & Olufsen

makes them much harder to segment. The new identity creator is future memories that could be questions like what would it take for me to be happy when I am 70 years old? This means that consumers are harder to label and the Minerva model is not structured for this (http://www.kommunikationsforum.dk/artikler/glem-­‐minerva).

Like with the Gallup compass one category sticks out and that is the blue segment. The modern and the blue segments are a bit alike with the same definitions such as prestige and the need for visible success. The blue segment, like the modern person in Gallup’s compass, also reads business papers (http://www.cifs.dk/scripts/artikel.asp?id=741&lng=2). Bang & Olufsen should try and target the blue segment in the Minerva model. People that a more individualistic tends to buy better and more expensive things for themselves. I think B&O should try and capture these consumers because there is a potential for a big profit. The prestige the segment wants appeals to the luxury of the Beovision 11. The television is a great visible object that shows how much success your having. It really shows your guest that you are doing well. In all homes there are televisions but with a Beovision 11 you stick out. I think this is very appealing to the people in the blue segment. Beovision 11 has a trendy design and the newest technology, which I think will appeal to the modern consumers in the blue segment.

3.2.3 Conzoom

Conzoom is another segmentation model that before was known as MOSAIC, the producer is Geomatic (https://www.conzoom.eu). The model is a geodemographical report that describes where the company´s potential customers are located in Denmark. It also deals with customer’s position criteria´s. It gives the company an overview of future potential and the current market. A Conzoom report shows segmentations and consumer types (https://www.conzoom.eu/conzoom_report/default.aspx).

Conzoom divides customer´s up in eight overall groups. The eight groups are further more divided up in 30 subgroups. The Conzoom report then shows the company where the different groups are located around the country (https://www.conzoom.eu/conzoom/Gruppe/default.aspx). There is a need to segment 10

Segmentation and positioning – Bang & Olufsen

smaller and smaller groups, which will intensify the costs (Neal & Wurst, 2001). Even though the theory says so I think 30 subgroups would be to many for Bang & Olufsen in Denmark.

I think the size of these subgroups is to small for B&O and will create to narrow a target group. This could be helpful for smaller business´ but B&O are to big a company. Subgroups of 30 would be way to many for a big and global company like Bang & Olufsen. I have chosen not to use the subgroups, and instead focus on the eight overall groups.

The eight different groups describe different things about the people in them. The description contains information about how the people live, where they live, wealth, leisure activities and how they define success (https://www.conzoom.eu/conzoom/Gruppe/D_Velhavere.aspx).

One group sticks more out when it comes to Bang & Olufsen´s marketing of the Beovision 11 and that group is the affluent people. The Group consists of the wealthiest and best-­‐educated people in Denmark. Not all live in big houses but they all have economical leeway. The people live in attractive neighbourhoods close to sea, forest or a golf court. Success is a factor for the group, even though they would say themselves that money is not the goal (https://www.conzoom.eu/conzoom/Gruppe/D_Velhavere.aspx). Another group that might be a bit interesting to Bang & Olufsen is homeowners with economic surplus. The reason why they are interesting is their income. The group is described as people with a good economy and well-­‐paid occupations. They live in houses in good neighbourhoods. The segments age is broad, and can range from younger people in good occupations to older retired people. The homeowners are well informed and read anything from newspapers to golf magazines. They cultivate their leisure time and have the resources to do so (https://www.conzoom.eu/conzoom/Gruppe/A_Boligejere_med_overskud.aspx).

The Conzoom model also suggests how the company should communicate with each group. The affluent people use almost all media´s and hold both newspapers and lifestyle magazines. They are not influenced by prize reductions but rather by good quality and product security (https://www.conzoom.eu/conzoom/Gruppe/D_Velhavere.aspx). I think Bang & Olufsen should certainly focus on the affluent people because they seem to be the most concentrated group of potential customers. If B&O use geographical marketing they are also likely to hit some homeowners with economic surplus, since the two groups are located in the most attractive neighbourhoods.

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Segmentation and positioning – Bang & Olufsen

Bang & Olufsen´s Beovision 11 is both of good quality and has a long product security, which fits the people in the affluent group. I definitely think Bang & Olufsen can use Conzoom when targeting the customers. Conzoom contributes with better awareness of where the people are located and their preferences, this makes it easier for B&O to geographically target the right people with i.e., billboard advertising. Bang & Olufsen could also use golf magazines for advertises since both segments seem to like golf. I have decided to keep working with the two segments from the Conzoom model instead of the segments from the Gallup compass and the Minerva model. I have chosen so because the Conzoom model covers more than one segmentation criteria, which I think makes it much more relevant.

3.3 The advantages of market segmentation There are four different advantages from using market segmentation, they are target market selection, differentiation, tailored marketing mix and opportunities and threats (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007). Bang & Olufsen can derive some advantages when they use segmentation with Beovision 11. The advantages will now be explained. Target market selection The company learns about the customer´s behaviour through market segmentation. The company have the possibility to choose which segmented markets to target. The segmented customer groups have comparable preferences and it would be possible to use one marketing strategy within the targeted group. Segmentation might also lead to identification of new segments that are attractive to the company (Jobber, 2007). Bang & Olufsen can use the segmentation models for this advantage. The segmentation models have been analysed and groups of customers have been found. These groups have similar preferences and give good explanations about the customers. B&O can choose a segmented group and then target them with one marketing strategy to save money.

Differentiation 12

Segmentation and positioning – Bang & Olufsen

Market segmentation can be used to identify sub-­‐segments within the market. The company then have a chance to target more than one segment and allow differentiation between the segments. The differentiation gives the company a competitive advantage over its rivals and thus giving the customers a reason to buy their product (Jobber, 2007). The Beovision is not like all other televisions out there. It has a unique design and a high quality. Bang & Olufsen can use these factors to differentiate themselves from the rest of the market. B&O´s Beovision 11 has a competitive advantage over other televisions when it comes to design and quality. Bang & Olufsen is seen as a luxury good and therefore they clearly differentiate themselves.

Tailored marketing mix The segmented group of customers are very useful when designing marketing strategies. The company have the knowledge to use the customer’s preferences to create better-­‐tailored marketing mixes. This is important when understanding and accommodating to the customers satisfaction and needs (Jobber, 2007). The Conzoom model suggests that the affluent people care more about quality and product security than price. Bang & Olufsen can use this information in creating a specially tailored marketing mix for this group. Opportunities and threats Opportunities and threats appear because customers develop new experiences and values. When new underserved market segments are found the company may have an opportunity to serve it first and earn a lot of profit. Or the competitors might be able to use the new segment to threaten the company and its position (Jobber, 2007). The television market is neither new nor underserved but there are still differences in the market. Bang & Olufsen has an opportunity to serve the high-­‐end customer´s that care about quality and design. There are not many operators in that segment which can give B&O a chance to earn a big profit. Operating in the luxury market also has a big risk. The financial crises hit very hard in these markets because consumer´s got more critical.

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Segmentation and positioning – Bang & Olufsen

4 Choice of target

In the choice of target the company has to choose one or more specific segments to use (Jobber, 2007). The two segmentation groups from Conzoom, the affluent and homeowners with economic surplus, will now be analysed in the target marketing.

4.1 SMUK

The SMUK model is used in assessing the segment that has been chosen. The model helps evaluating the sales opportunity and profitability of the segment, to show how attractive the segments are. Combined with the company’s goals and resources this can be used in choosing which segment to target. The SMUK model has four factors: size & growth, opportunities, the competition in the segment and the processing expenses. The size and growth of a segment refers to the purchasing power in the segment and also includes the development and possible growth opportunity in the segment. The opportunities have to due with the company’s accessibility in reaching the segment through their marketing and distribution channels. The expenses of processing the segment is analysing the expenses by serving the segment. The competition in the segment has to be evaluated, because there might be a fierce competition, which means it will not be profitable to compete (Andersen, Jensen, Jepsen, Schmalz, & Sørensen, 2007).

The affluent people represent a smaller segment of the wealthiest and best-­‐ The affluent people educated people in Denmark. Even though the group is small their ability to buy Beovision 11 is huge. The group has a great potential for Bang & Olufsen because they have the opportunity to buy high-­‐end products. It might be harder for Bang & Olufsen to reach the affluent people through the mass media, because the segment will often be key customers, since they use a lot of money, which require more individual attention. B&O can use mass media´s to create awareness about the new product and then use stores to give the last personal marketing. The segment needs to be caught by the B&O spirit.

The affluent people will properly require some high expenses in order to keep them satisfied. The level of service must be high, which means well-­‐educated personnel. The 14

Segmentation and positioning – Bang & Olufsen

expenses are high but so is the potential for high profit. The segment will pay more than others for good service, quality and design. The competition in the television market is fierce. Bang & Olufsen differentiate themselves by addressing matters like design and quality. Since the affluent segment has a lot of money they are attractive for the television manufactures. Bang & Olufsen really has to stand out from the competitors to get this segment.

Homeowners with economic surplus The segment size is bigger with different ages in it. The opportunity for Bang & Olufsen to earn money in this segment is good. The people have some money or a relatively high income. The group is bigger than the affluent but have less money so this segment might not be as profitable.

The segment is hard to reach through mass communication, because they will not buy anything. The homeowners with economic surplus will require more persuasion than the affluent segment. This can be done with more in-­‐depth explanations about the product. The expenses associated with this segment might also be quit high with educated personnel to provide knowledge about the product. The segment worries more about price than the affluent segment, which may indicate that they are not as likely to buy the high priced television. When buying the product they furthermore require more time from the personnel, because they are more thorough. The competition for the homeowners with economic surplus is great because they have money. Bang & Olufsen needs segments with wealth to pay for the expensive Beovision 11. This segment will be attractive to most television providers because they have the ability to pay for more expensive televisions.

4.2 Evaluating market segments

After choosing the segments it is now time to evaluate them. There are two factors, that contribute in the evaluation namely segments overall attractiveness and the company´s objective and resources (Kotler & Keller, 2012). The segments attractiveness is the potential for growth and profit within the segment (McDonald & Dunbar, 2004).

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Segmentation and positioning – Bang & Olufsen

Bang & Olufsen lunched a new five year strategy, “Leaner, Faster, Stronger”, in 2011. One of the focus areas was more attention towards customer satisfaction, which should be conducted through greater customer service. This is a key concept in differentiating the B&O brand. Bang & Olufsen still commits to produce high quality and timeless design. Bang & Olufsen´s key competences are inter alia the television picture quality, the sound and the innovative design (http://www.bang-­‐olufsen.com/~/media/Files/PDF/Investors/Annual-­‐ reports/Annual_Report_1011_DA.pdf). Homeowners with economic surplus The segment cares about the product, which fits great with Bang & Olufsen´s vision about high quality. The group also needs more persuasion, this can be given by the better customer service B&O are trying to introduce. The age of the segment consists of a wide range of people. It will be difficult for B&O to separate the people within the segment. All the people in different ages might not care equally about the modern design. Another factor is the more price conscious consumers in the segment.

If Bang & Olufsen target the homeowners segment I am afraid they will use a lot of effort on a segment where a lot of people will not be interested. The homeowners with economic surplus segment have potential buyers, but should not just be marketed just for the potential ones. The affluent people The affluent people have a lot of potential for sales. The consumers care about quality and product security, which is also Bang & Olufsen´s key to differentiation. The segment also wants great customer service, that can be provided by B&O´s “Leaner, Faster, Stronger” strategy. The consumer´s in the affluent segment all have the resources to buy the Beovision 11, this makes them very attractive to B&O. The competition for this segment is high, but Bang & Olufsen has a differentiation strategy that can diversify them from other competitors. If Bang & Olufsen chose this segment, they get consumer´s who all can afford the high-­‐end Beovision 11. Ceteris paribus these customers will be the most profitable, because they have the wealth to care about luxury goods.

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Segmentation and positioning – Bang & Olufsen

I think Bang & Olufsen should focus on the affluent people because this segment

goes hand in hand with the Beovision 11 luxury good. The segment is wealthy and cares about prestige, status, quality and design. The Beovision 11 has an opportunity to take advantage of these preferences. If Bang & Olufsen chooses to target this segment they might also indirectly hit the consumer in the homeowners segment. As before mentioned these two segments are not that different from each other i.e., their living locations and leisure activities. My target marketing strategy choice will be made relative to the affluent segment.

4.3 Target marketing strategies

When the market evaluation is over and the company has chosen one or more segments in which to compete, they need to target their marketing strategies to the segments. There are four strategies: undifferentiated marketing, differentiated marketing, focused marketing and customized marketing (Jobber, 2007). The four strategies will now be described and afterwards a recommendation to Bang & Olufsen will be given. Undifferentiated marketing In undifferentiated marketing the company uses the same marketing mix on the whole market. This can be a mistake due to lack of customer knowledge or just a way to save money. Undifferentiated marketing is easier to managers because there is only one promotion campaign and no need to develop new ones (Jobber, 2007).

Differentiated marketing With differentiated marketing the company designs marketing mixes for all their segments. The differentiated marketing makes it possible to use the different segments preferences. The company however looses the cheaper marketing from the undifferentiated marketing (Jobber, 2007). Focused marketing In focused marketing the company has chosen a small target and produced a special product for them. One marketing mix is produced for the special segment. This gives

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Segmentation and positioning – Bang & Olufsen

the company limitation and they only have to care about this segment. They can use all their resources on developing and maintaining their position in this segment (Jobber, 2007).

Customized marketing Customized marketing gives all customers their own marketing mix. It is designed to fit the uniqueness of the customers. The company may offer a lot of different opportunities to the individual to form the product as they wish (Jobber, 2007).

The Beovision 11 is a high-­‐end luxury good with a smaller segment to target, this fits with the focused marketing strategy. Bang & Olufsen will only have to target one small segment in Denmark, the affluent people. The Beovision 11 is about quality, design and differentiating the product from the competitors. Bang & Olufsen use most of their resources trying to keep their position and maintaining the differentiation. Focused marketing fits this company´s profile that only need one marketing mix because everyone knows the reputation of the brand. Focused marketing sells one dream to all, which is the Bang & Olufsen universe of unique experiences. In the end Bang & Olufsen could hope for something like Veblen effect, so that consumer will buy it because it is expensive, which shows the consumer´s economy is doing great. Another way for Bang & Olufsen to reach sustainable competitive advantage could be through brand differentiation. Brand differentiation is to create a unique selling proposition or to establish a unique emotional proposition (Hooley, Saunders, & Piercy, 1993). I think Bang & Olufsen have the ability to do this through the focused marketing strategy.

5. Conclusion

Bang & Olufsen has a lot of opportunities to segment and then target a specific B&O have some opportunities when deciding on which segmentation criteria´s consumer segment when marketing Beovision 11. to use. To be concrete they could use geography, demography, psychographic and behavioural. There are two segmentation models that deal with the psychographic criteria and those are the Gallup compass (modern) and Minerva (blue). I have chosen to work with 18

Segmentation and positioning – Bang & Olufsen

Conzoom because it deals with both the geographic and the psychographic. The recommendation for Bang & Olufsen is to either segment after the affluent or the homeowners. Some of the advantages Bang & Olufsen can receive from segmentation are: a segment gives a good explanation about consumer’s preferences, use market segmentation to differentiate themselves and they have an opportunity to earn a big profit.

To analyse the segment choices the SMUK model was used. The affluent segment has a high potential for profit because of their wealth. But they might also be expensive to serve because they require individual attention and educated personnel. The size of the homeowners segment is bigger, but they are not as financial rich as the affluent. The segment is full of different ages and can therefore be harder to understand. When it comes to choosing I would pick the affluent segment because I think they have a higher potential for profit. They also seem a better fit for Bang & Olufsen strategy of differentiation and customer service.

I think Bang & Olufsen should concentrate on a focused marketing strategy, because then they would only have to create one marketing strategy. In doing so they can create a special perception of the Beovision 11, which is high quality and product security. These factors suit Bang & Olufsen´s differentiation strategy to be a luxury good.

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Segmentation and positioning – Bang & Olufsen

Reference list

Andersen, F. R., Jensen, B. W., Jepsen, K., Schmalz, P., & Sørensen, J. K. (2007). International Markedsføring (3rd ed.). Den: Troyka a/s.

Bang & Olufsen. (2011). Annual report.

Hooley, G. J., Saunders, J. A., & Piercy, N. F. (1993). Marketing Strategy and Competitive Positioning (3th Ed.). UK: Prentice Hall.

Jobber, D. (2007). Principle and Practise of Marketing (5th ed.). UK: McGraw-­‐Hill Education.

Kotler, P., & Keller, K. L. (2012). Marketing Management (14th ed.). USA: Prentice Hall.

McDonald, M., & Dunbar, I. (2004). Market Segmentation. NE: Elsevier.

Neal, W. D., & Wurst, J. (2001). Advances in Market Segmentation. Marketing Research (Vol. 13).

Thomas, J. W. (2007). Market Segmentation. Decision Analyst.

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