Market segmentation and targeting strategy for Pley toy lending service in the UK

Market Segmentation

Feedback from the markers:

1. Segmentation and Targeting

Lots of students got in a pickle with this; the segmentation discussion should be around how best to segment the market. For Pley there are several distinct possible groups including:

• Families for whom space is at a premium
• Parents with environmental concerns
• Parents who are appalled by high levels of unused toys
• Parents/Grandparents who worry about screen time
• Parents/Grandparents who long for more traditional types of play
• Parents who are prepared to invest in a high level of education

Note that none of the above is simply “parents”. If you are identifying the target market as “everyone” then you need to consider other segmentation approaches. Poor answers often identified children as the target market, particularly those who spend a long time using an electronic screen, but this group of children does not consider that they have a problem that needs to be solved: it’s the carers of such children who desire to change things. And, of course, while a few argued for the use of pester power, which was given credit, children are consumers but not customers for this kind of service. Good responses explored lifestyle and/or benefit segmentation and often provided some data for the size of the market. Most students correctly identified that each of the groups are interested in purchasing a differentiated product.  Weaker students tended to theory dump without application.

The discussion should then move on to which of these groups to target first, with a rationale. Lots of students struggled with the concept that it is more effective commercially to clearly target and own a smaller group of customers than to try to be all things to all people. Consider the effectiveness of a 30 sec TV commercial that attempts to explain that Pley meets all of the needs above, versus a commercial that just clearly addresses one of the identified issues.  The best answers in this section referred to existing market data including size and a clear pen portrait. There were opportunities for buyer behaviour theories to be introduced, in particular theories around involvement and of course the idea of children as influencers and these also needed to be put into the context of the identified target market.

All of this discussion should have been up front in your submission, allowing you to justify the following…

2. Positioning

Better answers identified that this is all about the competition, but very few then went on to propose a positioning statement or to discuss each of the Ps in relation to the competition.

• Product

There were options here: you could make an argument to stick to the current range (especially in a location where ownership of US toys is highly valued), expand the range to include local toys or introduce new ranges eg STEM-specific or disability-supporting based on the target market identified; justification to the target market was often missing.

Targeting Strategy

Better answers used the Total Product Offering model and discussed brand management and other theories.

• Place

Although the brief asked you to identify a location, this was not done in a surprising number of responses, or sometimes was implicit. The place is, of course, online, but some students over-complicated this.

Many students proposed opening one or more shops. Without a very strong rationale based on the need of a very specific target market this is outside of Pley’s sphere of operation, would require enormous capital investment and single locations in particular are also unlikely to be of interest to a company currently operating in two huge markets unless for a specific purpose eg flagship or Christmas sales. A small number of students proposed collaboration with other retail operators, which was given some credit. Some students discussed the supply chain, and a very small number of students addressed the last mile issue, recognising drop off/collection points as part of the place offer, and the best proposed shared drop off points to minimise costs.

Again, justification was often missing (ie, I am recommending this as the best way to reach my target market)

• Price

Commonly, submissions would argue that the Pley service needed to be pitched at a ‘reasonable’ price (ie affordable) to make it more attractive for the market, but this is spurious thinking, and market-led pricing is key. Cheap prices will indicate cheap toys, not properly maintained and not sterilised etc.  Remember positioning: what position is the Pley service going to have in the chosen market, in the long term. It needs to be set from the start.

The call to introduce the product with penetration pricing was widely used, but should be approached with caution as expectations of a cheap/value product will be set: a small number of students recommended both penetration pricing and an introductory discount, which would really leave Pley with a hit on the bottom line (and probably demonstrated a lack of understanding of both). High scoring responses often discussed follow-on pricing, with an introductory price linked to the customer expectation of a higher price later if they like the service.

A few students talked about keeping the pricing comparable with the US, but usually did not also consider market demand or justify this recommendation.  

There were lots of opportunities to introduce supporting theories here, lots of students identified the use of psychological pricing in the US and translated the same approach to their own recommendations, but weaker students tended not to include any theories.

• Promotion

Product Strategy

Almost everyone identified that social media would be key, but surprisingly few students mentioned the deliberate use of influencers including blogging sites, Mumsnet etc. TV advertising was commonly mentioned but rarely with any recognition of cost or justification.

Only the best answers justified recommendations in the context of “this is the best and most effective way to reach my target audience”. The argument that by “having good promotion you will be seen by lots of people” simply does not hold any water but was a surprisingly common statement.  

Some students proposed billboards and/or handing out leaflets, but this is quite simply unlikely to reach a sufficient target audience to make your location viable and would need a discussion around how many, how many of the target audience reached, converted etc. Very often promotion was discussed as a random collection of ideas “Pley could also…” rather than as a deliberate campaign.

Quite a few students argued that the Toy Library is a service, and therefore used the 7 Ps, which gained extra marks. The best answers often included a discussion around the Product/Service Continuum.

3. Costings and ROI

Not a requirement within the brief, but some students went on to outline a business case and credit was given for an attempt that showed promise. Don’t forget where costings are concerned that you need to factor in discounts etc. Reliable ROI calculations consider the percentage of the market that can be reached, average spend etc. But more of this next year….

The following answer achieved a mark of 76

Pley.com is a subscription-based monthly toy lending service that currently operates in the US and Canada. It has formed alliances with Lego and Disney, and its ethos is to get children off their mobile phones and electronic devices (age range 0-11) and enjoy the joy of play. It strongly believes in the premise of access-over-ownership and for each new member subscription a toy is donated to an underprivileged child. Not more cluttered lofts and garages, no more unwanted toys filling up landfill sites, smart consumers owning something only for the exact time required.

The business is now looking to operate on a more international level and believes that the UK is a good prospective location and has therefore presented a marketing strategy.

The marketing strategy will be addressed as follows:

1. The market
2. Segmentation & Targeting; what is the current market like and who are we targeting?
3. Positioning, how will this be achieved?

The Market

Currently in the UK there is no national toy lending service. There are some toy libraries but these are generally run by local authorities. They have very limited opening hours and coverage.

Pricing Strategy

Unlike the US and Canada, space is at a premium in the UK, which makes it ideal. Houses are smaller and gardens are often smaller too. With the opportunity of access but not ownership the market could potentially be huge. With sustainability issues and the amount of rubbish going to landfills, many families may be happy to have a trampoline in their garden for a few weeks but not 5 years!

Segmentation and targeting

When choosing a target it is useful for marketers to be aware of buyer behaviour. The following 2 diagrams help to illustrate this. (Consumer and CBDP models follow). 

By applying this process to prospective customers in the UK:

• The problem: cramped houses, children getting bored with toys, too much waste in landfill, small gardens
• No similar service available

Listed below is a pen portrait of the specific target market for this new location venture for Pley:

A single mother, aged between 30 and 40 years old who has two children. She works and has a low to medium income which she uses on her children to buy them clothes and toys.

She cares deeply for her children’s well-being and their education and aspires to raise her children up so that they have a strong career in the future and are able to earn more money that she does now. She hopes that they will have a stable future and memories of a happy, fulfilled childhood.

She lives with her children in a small, cosy apartment. She likes to have the apartment clutter-free and ordered and has taught her kids to appreciate the same. She cares about the environment and aims to be as sustainable as she can be. She is teaching her kids to be sustainable too.

Product

TPO model is used to discuss the service

The product on offer is the Toy Library. However, because space and especially garden space is so limited, and tapping into childhood healthier concerns in the UK a greater number of activity toys will be offered. These will include trampolines, inflatable kayaks, tennis and other sports sets, inflatable giant unicorns (very popular in the UK), unicycles, tepees.

We will develop the range of STEM toys to include more AI (artificial intelligence) interactive toys and that of children’s 3D printers.

A new range of sensory toys will also be available for children with disabilities. If demand is strong we will also look into the possibility of a musical instrument lending library.

Price

Pricing structures should vary as to the market influencers and the product itself. The pricing structure we envisage for the UK will be similar to that on offer in the US. There will be 3 types of subscription (these are then described).

Each toy has a value of 1-3 credits. This pricing structure could be marketing as the same as gym member and emphasis the donation of a toy to an underprivileged child. The 99p pricing is an example of psychological pricing. The justification for the price is that the UK and US have similar living standards and so reflects US pricing (the marker comments here that more is needed and there is no discussion of what the identified target market can afford)

Place

When PleyUK decides to internationalise their operations they will require at least one distribution centre. The greatest potential market we envision is that tof the South East of England where wages are higher so more affluent parents but with less space.

The distribution centre will be based in Bedfordshire. It has great motorway links to the rest of the UK without the costs involved of the Home Counties. The management of the supply chain network is key to efficient and effective production.

PleyUK will benefit from the business model of Pley.com which has an efficient lending software programme design by the COO of Netflix.

In the US the distribution centre can sanitise Lego toys within 2.5 minutes ready to be lent again. This system will be adopted in the UK.