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Chapter Seven
Customer-Driven Marketing
Strategy:
Creating Value for Target Customers
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Customer-Driven Marketing Strategy: Creating Value for
Target Customers
This chapter looks into key customer-driven marketing strategy 4 steps:
1- dividing up markets into meaningful customer groups (segmentation),
2- choosing which customer groups to serve (targeting),
3- creating market offerings that best serve targeted customers
(differentiation), and
4- positioning the offerings in the minds of consumers (positioning).
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Customer-Driven Marketing Strategy:
Creating Value for Target Customers
Topic Outline
Customer-Driven Marketing Strategy
major steps to create value for
customers:
• Market Segmentation
• Market Targeting
• Differentiation and Positioning
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Customer-Driven Marketing Strategy:
Creating Value for Target Customers
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Market Segmentation
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Market Segmentation
Market segmentation
Dividing a market into smaller segments with
distinct needs, characteristics, or behavior
that might require separate marketing
strategies or mixes.
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Market Segmentation
Segmenting Consumer Markets
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
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Market Segmentation
Segmenting Consumer Markets
• Geographic segmentation divides the
market into different geographical units
such as nations, regions, states, counties,
or cities.
Example: Walmart services Hispanic places in U.S.A
with relevant product assortment.
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Market Segmentation
Segmenting Consumer Markets
Demographic
segmentation
divides the market into groups
based on variables such as age,
gender, family size, family life
cycle, income, occupation,
education,
religion,
race,
generation, and nationality
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Market Segmentation
Segmenting Consumer Markets
- Age and life-cycle stage segmentation is the
process of offering different products or using
different marketing approaches for different
age and life-cycle groups.
- Gender segmentation divides the market based
on sex (male or female).
- Income segmentation divides the market into
affluent, middle-income or low-income
consumers.
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Market Segmentation
Segmenting Consumer Markets
Psychographic segmentation
divides buyers into different
groups based on social class,
lifestyle, or personality traits
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Market Segmentation
Segmenting Consumer Markets
Behavioral segmentation divides
buyers into groups based on their
knowledge, attitudes, uses, or
responses to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
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Market Segmentation
Segmenting Consumer Markets
• Occasions (Some holidays, such as Mother’s Day and Father’s
Day, were originally promoted partly to increase the sale of candy,
flowers, cards, and other gifts).
• Benefits sought (benefits people look for in the product)
• User status (nonusers, ex-users, potential users, first-time
users, and regular users of a product)
• Usage rate (light, medium, and heavy product users).
• Loyalty status (Consumers can be loyal to brands (Tide),
stores (Target), and companies (Apple). Buyers can be divided into
groups according to their degree of loyalty).
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Market Segmentation
Segmenting International markets
Geographic
location
Economic
factors
Politicallegal factors
Cultural
factors
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Market Segmentation
Segmenting International Markets
- Intermarket
segmentation
divides consumers into groups
with similar needs and buying
behaviors even though they are
located in different countries
- Large companies, such as CocaCola or Sony, sell products in
more than 200 countries.
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Market Segmentation
Requirements for Effective Segmentation
To be useful, market segments must be:
Measurable
Accessible
Substantial
Differentiable
Actionable
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Market Segmentation
Requirements for Effective Segmentation
1- Measurable: The size, purchasing power, and profiles of
the segments can be measured.
2- Accessible: The market segments can be effectively
reached and served.
3- Substantial: The market segments are large or
profitable enough to serve.
4- Differentiable: The segments are conceptually
distinguishable and respond differently to different
marketing mix elements and programs. If men and women
respond similarly to marketing efforts for soft drinks, they
do not constitute separate segments.
5- Actionable: Effective programs can be designed for
attracting and serving the segments.
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Market Targeting
Evaluating Market Segments
In evaluating different market segments, a firm must
look at three factors:
• Segment size and growth: current segment sales,
growth rates, and the expected profitability for various segments.
• Segment structural attractiveness:
includes
factors that affect long-run attractiveness. These factors might
include strong and aggressive competitors, substitute products, and
high power of buyers or powerful suppliers.
• Company objectives and resources:
markets may not be relevant to some companies.
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large
Market Targeting
Selecting Target Market
Segments
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Market Targeting
Selecting Target Market Segments
After evaluating different segments, the
company must decide which and how many
segments it will target.
Target market consists of a set of
buyers who share common
needs or characteristics that the
company decides to serve
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Market Targeting
Target Marketing Strategies
• Undifferentiated marketing targets the
whole market with one offer
– Mass marketing
– Focuses on common needs rather than what’s
different
– The company designs a product and a
marketing program that will appeal to the
largest number of buyers.
– Example: Coca Cola
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Market Targeting
Target Marketing Strategies
• Differentiated (Segmented) marketing
targets several different market segments and
designs separate offers for each
- Example:
Toyota Corporation produces several different
brands of cars—from Scion to Toyota to Lexus—each targeting its
own segments of car buyers.
- Goal is to achieve higher sales and stronger
position
- More expensive than undifferentiated
marketing
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Market Targeting
Target Market Strategies
• Concentrated (niche) marketing
targets large share of one or a few
segments or niches.
- Example: Whole Foods thrives by catering to
affluent customers who Walmart can’t serve
well
- Limited company resources
- Greater knowledge of the market needs
- More effective and efficient (satisfying
market need with low cost)
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Marketing Targeting
Target Market Strategies
• Micromarketing is the practice of
tailoring products and marketing
programs to suit the tastes of specific
individuals and locations.
- Micromarketing includes:
• Local marketing
• Individual marketing
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Market Targeting
Target Market Strategies
• Local marketing involves tailoring brands
and promotion to the needs and wants of
local customer groups
- Cities
- Neighborhoods
- Stores
- example, Walmart customizes its merchandise store by store
to meet the needs of local shoppers.
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Market Targeting
Target Market Strategies
• Individual marketing involves
tailoring products and marketing
programs to the needs and
preferences of individual customers
- Example: Dell, HP, and Apple create customconfigured computers.
- Also known as:
One-to-one marketing
Mass customization
Markets-of-one marketing
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Choosing a target strategy depends on:
• Company resources: When the firm’s resources are limited, concentrated marketing
makes the most sense.
• Product variability: Undifferentiated marketing is more suited for uniform products,
such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are
more suited to differentiation or concentration.
• Product life-cycle stage: When a firm introduces a new product, it may be practical
to launch one version only, and undifferentiated marketing or concentrated marketing
may make the most sense. In the mature stage of the product life cycle (PLC), however,
differentiated marketing often makes more sense.
• Market variability: If most buyers have the same tastes, buy the same
amounts, and react the same way to marketing efforts, undifferentiated
marketing is appropriate.
• Competitor’s marketing strategies: When competitors use differentiated or
concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when
competitors use undifferentiated marketing, a firm can gain an advantage by using
differentiated or concentrated marketing, focusing on the needs of buyers in specific
segments.
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Differentiation
and
Positioning
Products are made in factories, but brands happen in
the minds of consumers.
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Differentiation and Positioning
•
Product position is the way the product is
defined by consumers on important
attributes—the place the product occupies in
consumers’ minds relative to competing
products.
• It is the complex set of perceptions,
impressions, and feelings that consumers have
for the product compared with competing
products.
• Example: Tide is positioned as a powerful, allpurpose family detergent; Ivory is positioned
as the gentle detergent for fine washables and
baby clothes, and Toyota positions its fuel
efficient.
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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
• Identifying a set of possible competitive
advantages to build a position.
• Choosing the right competitive
advantages.
• Selecting an overall positioning strategy
(value proposition).
• Communicating and delivering the chosen
position to the market.
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Differentiation and Positioning
Identifying Possible Value Differences and
Competitive Advantages
Competitive advantage is an advantage over
competitors gained by offering consumers
greater value, either through lower prices
or by providing more benefits that justify
higher prices
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Differentiation and Positioning
Choosing a Differentiation and Positioning
Strategy
Identifying a set of possible competitive
advantages to build a position by
providing superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation
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Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
• Product differentiation, brands can be differentiated on features,
performance, or style and design.
• Services differentiation through speedy, convenient, or careful delivery.
• Channel differentiation gain competitive advantage through the way
they design their channel’s coverage, expertise, and performance. Amazon.com
and GEICO set themselves apart with their smooth-functioning direct channels.
• People differentiation—hiring and training better people than their
competitors do. Disney World people are known to be friendly and upbeat.
• Image differentiation. A company or brand image should convey a product’s
distinctive benefits and positioning (such as quality).
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Differentiation and Positioning
Choosing the Right Competitive Advantage
Differences to promote should be:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
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Differentiation and Positioning
Choosing the Right Competitive Advantage
Differences to promote should be:
• Important: The difference delivers a highly valued benefit to target
Buyers (usable benefits).
• Distinctive: Competitors do not offer the difference, or the company
can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers
might obtain the same benefit.
• Communicable: The difference is communicable and visible to
buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
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Differentiation and Positioning
Selecting an Overall Positioning Strategy
(value proposition)
Value proposition is the full
mix of benefits upon
which a brand is
positioned
The five green cells
represent winning
value propositions—
differentiation and
positioning that gives
the company
competitive
advantage.
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Selecting an Overall Positioning Strategy (value proposition)
• More-for-more positioning involves providing the most upscale product or
service and charging a higher price to cover the higher costs. Example: Four Seasons
hotels, Rolex watches, Mercedes automobiles—each claims superior quality,
craftsmanship, durability, performance, or style and charges a price to match.
• More for the Same. Companies can attack a competitor’s more-for-more
positioning by introducing a brand offering comparable quality at a lower price.
Example, Toyota introduced its Lexus line with a “more-for-the-same” value proposition
versus Mercedes and BMW.
• The Same for Less. Offering “the same for less” can be a powerful value
proposition— everyone likes a good deal. Example: Discount stores such as Walmart
and DSW Shoes use this positioning. They don’t claim to offer different or better
products, but give discounts based on superior purchasing power and lower-cost
operations.
• Less for Much Less. A market almost always exists for products that offer less
and therefore cost less. Few people need, want, or can afford “the very best” in
everything they buy. In many cases, consumers will gladly settle for less than optimal
performance for a lower price.
• More for Less. Of course, the winning value proposition would be to offer “more for
less. Example: Depot had arguably the best product selection, the best service, and the
lowest prices compared to local hardware stores and other home improvement chains.
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