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CHAPTER 5
Consumer Behaviors and Marketing Strategies
Chapter Summary
Marketing strategy concerns the actions managers take to improve the likelihood market-place
exchanges that meet firm and customer goals will occur. In general, customer- oriented
marketing strategies improve the value customers derive from products or decrease the costs of
products to customers. Firms may adopt any of four general strategic positions: (1) prospector,
(2) analyzer, (3) defender, or (4) reactor. More specific strategies include differentiation, market
penetrations, and cost leadership.
One of the most critical skills for a successful business is to empathize with and gain insights
from customers. A customer focus is the central element of this market orientation. A market
orientation is not solely the responsibility of a marketing department, however; it requires the
concerted action of everyone in the organization. The degree of competition in an industry
affects the importance of a market orientation. When there are many competitors, it is difficult to
develop a distinctive product position.
The connection between understanding consumers and designing effective marketing strategies
requires creativity and imagination. Marketing intelligence attempts to find out what problem
consumers are trying to solve, and marketing imagination offers solutions. But beyond the
traditional modes of market research, marketing imagination requires deep insight into the needs,
lifestyles, and aspirations of the customers of today and tomorrow.
Market segmentation, targeting, and positioning are central elements of marketing strategies.
The process of market segmentation begins with a thorough investigation of consumer-product
relationships. This investigation includes examining environmental factors involved in the
purchase-consumption process for the product; what the product means to consumers and how
involved they are in purchasing and consuming it; and the behaviors involved in the
purchase/consumption process for the product. Then, an organization can investigate alternative
market segmentation approaches. Geographic or demographic criteria, psychographic variables,
and behavioral variables are bases for identifying market segments. Whichever segmentation
approach an organization chooses, four general criteria of good segmentation are measurability,
substantiality, accessibility, and responsiveness. After investigating alternative segmentation
approaches, managers must select the most appropriate group or groups for the firm to serve.
They can use undifferentiated marketing, differentiated marketing, or concentrated or niche
marketing as the basis for choosing the segment or segments.
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Next, the firm's managers must decide on product positioning: how they would like the company
and its brands to be perceived and evaluated by target markets. One general technique that's
often used to position products and services is perceptual mapping. Once they know how they
want the company and its products to be perceived and evaluated by consumers, managers must
design a market mix strategy to achieve or maintain the position. Everything associated with the
product - its distribution, promotion and price-communicates the position of the product to the
customer. By managing the market mix, companies can establish, change, or maintain desired
product positions.
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Teaching Objectives
After completing this chapter, your students should be able to:
1. Explain why effective marketing strategy depends on understanding consumer behavior.
2. Identify the keys to adopting a market orientation and a consumer focus.
3. Understand the importance of marketing imagination to business success and know some
keys to being an imaginative company.
4. Describe market segmentation and identify a process for segmenting markets.
5. Identify useful segmentation variables and criteria for effective market segmentation.
6. Describe different kinds of market segmentation strategies and when they are appropriate.
7. Understand the relationship between positioning and targeting.
8. Describe different product positioning strategies.
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Chapter Outline – Lecture Notes for Instructors
Overview
Marketing Strategies
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Strategy can be defined simply as the actions managers take to attain the goals of the firm.
Marketing strategy concerns the actions managers take to improve the likelihood
marketplace exchanges will occur between a firm and its target market(s).
In the twenty-first century more and more buyer-seller transactions will occur in an
information-defined arena coined market space. B2B online commerce or e-commerce is
expected to account for more than $1 trillion by 2003.
The contents of marketplace transactions, the contexts in which they occur and the support
activities that enable them are all likely to be very different from those same kind of
exchanges in the physical marketplace.
Business auctions have created a new business interface between buyers and companies that
has altered the competitive dynamics of industries, both for business-to-consumer and
business-to-business marketers.
Companies with marketing imagination go beyond what consumers are able to tell
researchers to find new ways to create value for them.
Although every successful marketing strategy is built on important skills and resources, none
is more critical than the ability to sense the market. Effectively sensing the market produces
knowledge, not just information.
Listening carefully to customers and remaining market-focused leads to market offerings that
are different from competitors’ products and to improved profit margins.
Organizations need to understand consumer behavior in order to segment markets, choose
market segments to serve, and develop and position products and services to attract current
and potential customers.
Developing and positioning products and services involves not just deciding on the product
or service form but also communications and promotions, distribution systems, and pricing
techniques.
 One of the most important applications of consumer research is to improve marketing
strategies. In general, customer-oriented marketing strategies improve the value
customers derive from products or decrease the costs of products to customers.
 One useful categorization of strategies identifies four strategy types:
1. Defenders are firms with a narrow product market, a stable customer group, and an
established organization structure typically managed by older executives.
2. Prospectors have a changing product market, a focus on innovation and change, and a
flexible organizational structure headed by younger managers. A differentiation
strategy emphasizing a product that is unique in the industry, provides a distinct
advantage, or is otherwise set apart from competitors’ brands in some way is a more
specific example of a Prospector Strategy.
3. The Analyzer strategy falls between Defenders and Prospectors on the continuum.
Analyzers generally operate in two types of product/market domains: one relatively
stable and the other changing. In their stable areas, they operate routinely and efficiently
through the use of formalized structures and processes.
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4. Reactors do not really have a consistent strategy. Reactors tend not to be very customeroriented and adopt a “me-too” approach to marketing.
Market Focused and Customer Oriented
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The Marketing Concept is a business philosophy, an ideal and a policy statement. The
essence of the marketing concept is a market-focused, customer-oriented, coordinated
marketing effort aimed at generating customer satisfaction as the key to satisfying
organizational needs.
Customer focus is the central element of a market orientation. Organizations with a
customer focus constantly look for ways to deliver greater value to current and
prospective customers through mutually beneficial exchanges.
Sensing the market refers to a manager’s ability to empathize with and gain insights
from customers. This is the single most important skill a manager can use to mobilize
new technologies, develop product and service offerings, and design communications
programs. All the elements of a company’s strategic posture depend on this skill.
Effectively sensing the market produces knowledge not just information. By listening
carefully to customers and remaining market focused, a company can develop products
that are fundamentally different from those of its competitors, which can result in
increased profit margin.
Differentiation means offering customers something they value and that competitors
don’t have. Differentiation can occur at any point in the consumption chain--from how
and when the product is acquired to when consumers decide they no longer want it and
decide to dispose of it.
Market Intelligence includes knowledge of environmental factors that affect customers’
needs and preferences and emphasizes current as well as future needs of customers.
Managers emphasize the need for coordinated marketing, stressing that a market
orientation is not just the responsibility of a marketing department.
Effectively sharing intelligence is important because it provides a basis for joint action by
different departments. Managers stress that certain kinds of environmental conditions
may make a market orientation more or less important to overall business performance.
Managers also stress that the degree of competition in an industry affects the importance
of a market orientation. Increased competition makes it difficult for firms to develop
distinctive product positioning strategies.
For organizations to become more market oriented they often must acknowledge gaps
between their current orientation and a market orientation.
The Context of Strategy Development
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Marketing and organizational strategies must be designed around an understanding of
consumers’ thoughts, feelings and behaviors. Companies must avoid a narrow focus
when trying to understand consumers.
Global consumer marketing usually requires firms to tailor their strategies in response to
variations in their environment. Typical sources of pressure to respond to local
conditions include: a) differences in consumer tastes and preferences, b) differences in
infrastructure and customary marketing practices, c) differences in distribution channels,
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and d) host government rules and regulations. Differences in distribution channels
include such things as channel penetration and retail concentration.
In international consumer marketing, in addition to capital, expertise in marketing
strategy is one of the most universally sought capabilities.
Consumers’ Thoughts, Feelings, and Behaviors
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Within a particular context, a person may have conflicting thoughts, feelings and
behaviors toward a product or service. By digging into the conflicts between feelings,
thoughts, and behavior, managers can not only better satisfy existing customers, but also
develop differentiated products that appeal to un-served portions of the market.
By examining both what consumers feel and what they do, marketers will have a better
chance of developing a marketing mix that delivers superior value to a chosen target
market segment.
Analyzing both consumer attitudes and behaviors can help you pinpoint consumer
segments that are not worth trying to develop.
Marketing Imagination
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The connection between understanding customers and designing effective marketing
strategies requires creativity and imagination.
Marketing intelligence attempts to find out what problems customers are trying to solve,
and marketing imagination offers solutions.
Companies with marketing imagination are able to lead customers where they want to go
before customers know it themselves.
From a consumer behavior standpoint, the core of marketing strategy concerns market
segmentation, targeting, and product positioning.
Market Segmentation and Mass Customization
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Market segmentation is based on a simple idea – in general, not everyone wants the same
things. From this idea comes market segmentation, which is the process of dividing a
market into identifiable groups of similar consumers.
The marketing mix refers to those basic understanding blocks of marketing strategy – a
product, its price, promotional communications, and its place of purchase and delivery.
Soon market segmentation may give way to mass customization. A growing number of
manufacturers are adopting mass customization. Customization means manufacturing a
product or delivering a service in response to a particular customer’s needs, and mass
customization means doing it in a cost-effective way.
With the growth of the Internet, mass customization is likely to be a significant force in
the next few decades as more companies try to cultivate learning relationships with
their customers. By learning about the customer during each exchange, companies can
more precisely tailor products and services to the particular needs of that customer.
The firm achieves a competitive advantage when it is able to deliver to consumers a
bundle of benefits or values that they perceive to be unique to the product.
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Investigating Consumer-Product Relationships
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From our perspective, the first step in developing a useful understanding of market
segments is investigating consumer/product relationships.
At the most general level, organizations need to ask what kind of environmental factors
are involved in the purchase/consumption process for the market. People do develop
complex relationships with some products and brands they use.
At the extreme, some brands become the focus of brand communities, groups of people
that share a consciousness of a kind, share moral responsibility for other members of the
community, and perpetuate rituals and traditions associated with the brand.
Investigation of Alternative Segmentation Approaches
Usually segmentation of consumer markets is based on one or more of three basic criteria:
consumer needs as related to (1) geographic or demographic criteria, (2) psychographic
variables, or (3) behavioral variables.
1. Geographic segmentation divides the market into different geographical units such as
nations, states, regions, counties, cities, or neighborhoods. Demographic segmentation
consists of dividing the market into groups on the basis of variables such as age, sex, income,
occupation, education, religion, family size, family life cycle and ethnicity. Demographic
variables are the most popular bases for distinguishing customer groups.
2. Psychographic segmentation divides buyers into groups on the basis of differences in
consumer lifestyle. We can think of lifestyle as how people live. This includes their
activities, interests and opinions. Lifestyles are certainly related to demographics such as
income, occupation, gender, family life cycle, ethnicity and so on, but they also reflect a
complex composite of a person’s self and experiences. Increasingly hybrid approaches to
segmentation that combine demographics, geographics, and psychographics, are employed to
more precisely segment markets.
3. Behavioral segmentation divides buyers into groups on the basis of differences in their
knowledge, attitude, use or response to a product. Benefit segmentation divides buyers
based on the different benefits they seek from the product. Marketers have tried to explore the
sorts of benefits that are desired by different groups of consumers and which of these benefits
leads to the greatest amount of consumer satisfaction. Not only do consumers derive
different types of benefits from products in general, but also different consumers may derive
different benefits from the same product. Often markets can be segmented into light,
medium, and heavy user groups. This makes usage rate segmentation, segmenting the
market by amount of the product purchased or consumed, valuable. Occasion segmentation
divides buyers according to when they acquire and/or use a product. Occasion segmentation
can help firms expand product usage. Buyer readiness refers to the fact that at any time
people are in different stages of willingness to buy a product.
Whichever segmentation criteria an organization chooses, four general rules of good
segmentation can be identified.
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First, in selecting market segments, a firm should assess whether a segment is measurable. Can
the segment be clearly identified on the basis of measurable criteria?
A second important criterion is that of substantiality. The market segment needs to be of
sufficient size to warrant the expense of developing a market offering to meet its needs.
Does the segment exhibit adequate market potential? Ideally a segment should be growing.
A third criterion for effective market segmentation is accessibility. Accessibly refers both to the
ability of an organization to communicate with its customers and to its ability to deliver
products and services to its customers reliably.
The fourth criterion of effective market segmentation is responsiveness. Responsiveness refers
to the fact that a segment reacts differently than others to the elements of the marketing mix.
Choosing Market Segments to Target
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From a consumer behavior perspective, the next task in developing marketing strategy is
selecting the most appropriate group or groups for the firm to serve.
In choosing whom to serve, a firm may adopt three basic strategies.
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The first strategy is ignoring differences between groups within a market and
offering a single marketing mix to the entire market. We refer to this strategic choice as
mass or undifferentiated marketing. Some benefits accrue to a firm using
undifferentiated marketing, most notably cost economies in production and marketing.
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A second strategic option available is to operate in several segments of the market
and design separate marketing mixes for each one. We refer to this as differentiated or
multi-segment marketing. The multi-segment option entails both benefits and costs for
an organization. On the one hand, by creating special marketing mixes for each segment,
the organization hopes to create more total sales, or in the case of non-profits, to obtain
more donations. On the other hand, multi-segment marketing is likely to increase the
research and development. Production and marketing costs incurred as a result of creating
multiple marketing mixes.
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The final option available to an organization is to seek a large share of one or a
few sub-markets. We call this approach concentrated or niche marketing. There are a
number of benefits enjoyed by organizations that adopt a concentrated marketing
strategy. Among them are greater knowledge of their market segment’s needs and wants,
operation economies of scale, and increased loyalty from grateful customers. Some costs
accompany this strategy too. Perhaps the most serious is the vulnerability to rapid and
unpredicted changes in the segment’s needs and wants. Further, the firm may be
vulnerable to competition from larger multi-segment marketing firms who suddenly
recognize opportunities in the niche marketer’s market.
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In making decisions about what strategy to adopt, the organization needs to examine a
number of questions.
1. The firm should consider skills and resources available to the organization. The more
limited the skills and resources, the more likely undifferentiated strategies should be
adopted.
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2. The firm should assess market variability as suggested in the section on segmentation.
If the market is not composed of identifiable, sizable, accessible, responsive
segments, an undifferentiated strategy may be appropriate. Alternatively, if many
segments are identified, a differentiated or concentrated strategy is appropriate.
3. The variability of the product needs to be considered. Consumers perceive few
differences between varieties. However, if one was marketing potatoes in Peru or
Denmark where numerous varieties of potatoes are grown, or mushrooms in France
where dozens of mushroom varieties are recognized, differentiated strategies might
be required.
4. The stage of the product life cycle should be determined. Differentiated strategies
become more common during the growth and maturity phases, and concentrated
strategies may become fruitful during the maturity and decline phases.
5. Competitors’ strategies should be evaluated. The costs of inattention to competitors’
strategies can be great.
Product Positioning
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Product positioning means deciding how the organization wants the company and its
brands to be perceived and evaluated by target markets. In general, product positioning
requires organizations to differentiate their market offerings from those of their
competitors. However, it’s not enough to distinguish their market offerings, they must do
so in ways that are meaningful to their target market segments.
Firms seeking to enter their brands in another country’s market may face very large
expenditures in order to build brand awareness and a positive brand image. Often a
particular kind of co-branding, called a brand alliance, can be used to position the brand
by the new market entrant. A brand alliance amounts to renting a brand name known to
target consumers from another firm.
To effectively position products and services for a target segment, the organization often
begins by identifying competitors. By analyzing consumers’ preferences as compared
with competitor positions, the company can determine a profitable, differentiated position
for their product/service.
One technique that is often used to position products and services is perceptual
mapping. A perceptual map is a spatial picture of how consumers view products or
brands within a market.
Designing a Marketing Mix Strategy
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Once a company knows how it wants to be perceived and evaluated by consumers the
next problem is to design a marketing mix strategy that will help them get there or stay
there. This includes developing tactics for communicating the position of the product to
target consumers. Many elements of the marketing mix associated with the product, its
distribution, promotion, and price communicate positioning to the customer.
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Often a company will attempt to change its image and position in the market. Changing
the marketing mix is the way this is done.
It is difficult to maintain a position in the market. Constant monitoring and innovation
are required simply to stay in the same place.
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Chapter 5
Review/Discussion Questions
1. Identify a firm in your community that you feel is highly customer oriented. Make a list
of the firm’s activities or behaviors that illustrate its market orientation. You might
include tools the firm uses to sense the market.
This exercise is designed to get students to think critically about a firm’s marketing
strategy (i.e., the actions managers take to improve the likelihood that marketplace
exchanges will occur between a firm and its target markets) and how it affects
consumers. It also encourages students to draw on marketing knowledge they acquired in
their marketing principles class such as the marketing concept (i.e., a market focused,
customer oriented, coordinated marketing effort aimed at generating customer
satisfaction as the key to satisfying organizational needs).
While the particulars of student examples will vary, they should include instances of a
variety of “good practices.” For example, student accounts might include situations of
marketing imagination where the firm has done something beyond their expectations to
find new ways of creating value by either using its marketing strategy to add benefits or
lower costs to customers. Or, coordinated marketing where they have derived
satisfaction from interactions with employees outside of the marketing function may be
evident. Examples of social marketing in which the firm has been engaged in community
activities may be highlighted as well.
Student examples of tools used by the firm to sense the market might include ways that
the firm listens to customers such as conducting focus groups or surveys and soliciting
complaints or suggestions. Other tools might include ways that the firm responds to
customers such as customer reward or retention programs. Finally, the firm must both
respond to and anticipate customer needs.
2. Identify the marketing strategies adopted by some familiar consumer goods companies
in terms of whether they resemble prospectors, analyzers, defenders, or reactors.
Prospector strategies involve a changing product market, a focus on innovation and
change, and a flexible organizational structure headed by younger managers. A
differentiation strategy is a more specific example of a prospector strategy. Examples
include entrepreneurial firms such as Lands’ End, Ebay, Nike, Starbucks, Amazon.com,
Excite, Samsung, 3M, and Microsoft. Prospectors take risks and try to shake up the
market. This strategy works most effectively when the environment is dynamic and
growing.
Analyzer strategies follow a price leadership strategy, or a low cost/low price strategy.
This strategy falls between defenders and prospectors on a continuum. This strategy
works best in two types of markets — relatively stable and the other changing. In stable
markets, firms operate routinely and efficiently through formalized structures and
processes. In changing markets, managers watch competitors closely for new ideas and
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rapidly adopt those that appear the most promising. Examples include Wal-Mart, Avis,
Costco, Target, Hyundai, Caterpillar, and Southwestern Airlines. Analyzers try to
maintain stability, while, at the same time, explore innovation in the sense of creating
rapid copies of successful market offerings.
Defender strategies include a narrow product market, a stable customer group, and an
established organization structure typically managed by older executives. Examples
include IBM, UPS, Tiffany Jewelers, GM, and Johnson and Johnson. Firms might use
either product and market development strategies or market penetration. Defenders
attempt to protect current markets by lowering costs, improving the performance of
current products, or creating entry barriers. This strategy works best in stable markets.
Reactor strategies are neither consistent nor very customer oriented and adopt a “me-too”
approach to marketing. Examples include The Gap, Alamo, Baskin-Robbins, and long
distance phone carriers such as MCI and Sprint. Reactors tend to respond slowly to
environmental change, often because they have limited resources.
3. Suppose that the McIlhenny Company has discovered that its market can be segmented
into light and heavy users of Tabasco sauce, with the smaller heavy user group
accounting for 75 percent of sales. What strategies and marketing mix tactics would you
use to reach these two groups of consumers? (Hint: consider market penetration and
market development strategies).
Student answers to this question should include applications of their knowledge of market
segmentation and new product strategies. Before Mcllhenny launches any marketing
strategies or tactics, the company should conduct research to understand consumer
product relationships for both heavy and light Tabasco sauce users. McIlhenny must
determine the level of brand loyalty for each segment. If the heavy users are brand
loyalists, the company should implement market penetration (i.e., extending the core
brand and suggesting new uses for the product to increase sales). If the heavy users are
brand indifferent, the company needs to increase the importance of the brand to users and
use product development (i.e., the introduction of new products (e.g., flanker brands) into
the market such as Tabasco Jalapeno Sauce. If the light users are brand loyalists, the
company should use a market penetration strategy to increase occasions for which these
consumers use Tabasco such as providing recipes and serving ideas (e.g., adding Tabasco
to scrambled eggs and cornbread). If the light users are brand indifferent, the company
needs to increase the importance of the brand name and increase usage.
4.
Use the dimensions of popular products to purchase on the Internet and
information identified in the example perceptual map. Construct your own perceptual
map using a selection of six web sites that you know. If your perceptions were
representative, what would be the managerial implications?
Student answers to this question should draw on Exhibit 5.5 that provides a perceptual
map (i.e., a spatial picture of how consumers view products and brands within a market)
of 15 products and services that could be purchased over the Internet. Whether or not
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respondents have purchased specific products and services online provides the basis for
the map. These results are culturally biased with a different pattern likely to result if the
map was constructed by consumers in another culture.
If student perceptions were representative of a target market, managers would have an
important element of marketing intelligence. Understanding consumer perception of the
competitive nature of the product market could be used in a variety of ways, including to
(1) identify competitors, (2) uncover market spaces not presently being served, (3) reveal
misperceptions about the product, (4) identify strengths of the product, and (5) pinpoint
appropriate product positioning strategies. For example, as discussed in the chapter,
marketers might divide the map into quadrants, with each one representing a unique
segment, and desire specific strategies for each of the segments.
5.
How could benefit segmentation be used to develop marketing strategy for the
following: (a) health clubs, (b) bath soaps, (c) cosmetics, (d) ice cream, (e) education, and
(f) bicycles?
To answer this question, students must divide buyers in these product markets according
to the different benefits they seek from the product along with the occasions consumers
associate with product use.
Some potential answers include:
(a) health clubs – self-improvement, health, fitness, and social affiliation/activities;
(b) bath soaps and (c) cosmetics – enhanced beauty, moisturizing, UV protection, age
defying, cleansing, anti bacterial, social status, and scents;
(d) ice cream – low-fat/healthy and save calories, luxurious taste, and reward;
(e) education – self-improvement, social affiliation, achievement, earning potential,
career potential, and availability of specific majors;
(f) bicycles – fitness, outdoor recreation, mountain climbing, spending time with family,
extreme sports/thrill, clean/ecological/economical transportation, handling, comfort,
durability, and speed.
6. Using cars as a product category, investigate different segmentation approaches (e.g.,
geographic and demographic; psychographic; and behavioral). Provide illustrations of
different brands and models that segment the market using these different bases.
Student segmentation analysis of car brands and models will include:
Geographic segments such as nations, states, regions, counties, cities, or neighborhoods.
Examples might include “California” cars with special air pollution controls, convertibles
for warmer climates, and smaller cars for urban areas.
Demographic segments include groups divided according to age, sex, income,
occupation, education, religion, family size, family life cycle, and ethnicity. Examples
might include 2- door, sport models for singles, vans for families, Hyundai and Geo for
lower income, Lexus for high income, and Dodge Ram trucks for farmers.
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Psychographic segments include groups divided on the basis of differences in consumer
lifestyle (i.e.. how people live). Examples include Subaru Outback, sports utility
vehicles, BMW, Saab, Lexus, Jeep, Nissan, Xterra, and Pontiac Aztec.
Behavioral segments involve groups divided on the basis of differences in their
knowledge, attitude, use, or response to a product. Behavioral segmentation includes
benefit segmentation – dividing buyers according to the different benefits they seek from
the product, usage rate segmentation – segmenting the market by the amount of the
product purchased or consumed, occasion segmentation – dividing buyers according to
when they acquire or use the product, and buyer readiness segments – dividing the
market with respect to different stages of willingness to buy a product. Examples include
safety-wise Volvos, Volkswagen “drivers”, BMW performance, Mercedes engineering,
Jeep off-road, Japanese quality, Toyota Prius, Honda Insight, and fuel economy models.
7. Review a popular commercial magazine and record the content of a series of print ads.
Try to identify the positioning bases of the products featured in the ads.
This question involves a recall of student knowledge of positioning bases. These include:
lifestyle, quality, price leadership, users, occasions or applications, competitors, product
class, and attributes.
8. Visit a local shopping district, such as a main street or mall. Go from store to store and
observe the customers. Make a detailed composite portrait of the customers at each
store using as many criteria as possible. Then, name the market segment you have
described.
This is an application exercise involving the different segmentation bases. Students’
composite portrait and resulting segmentation might involve demographics,
psychographics, and behavioral factors such as shopping patterns and strategies.
Classification by shopping behaviors might include (1) single or groups of shoppers, (2)
shoppers with or without lists, (3) length of time spent shopping, and (4) shopping style
(economic, personalized, recreational, ethical, and apathetic shopper). Students might
also classify shoppers by antecedent states such as time pressure and mood. Finally,
shopping patterns might be differentiated by buyers use of in store marketing strategies
including salespeople, point of purchase stimuli, and other promotional activities.
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Chapter Case Notes
You Make the Call “Royal Caribbean Cruises”
1. What should Royal Caribbean do?
Royal Caribbean (RC) has two marketing problems. First, its image is unclear to
consumers, because it is not communicating a strong, consistent message to its market.
Second, the cruise line does not have a clear competitive advantage, because of its
undifferentiated strategy. In other words, RC needs to practice market segmentation,
because not everyone wants the same benefits from a product or service.
Royal Caribbean needs to conduct a segmentation analysis to understand consumer
product relationships in the cruise vacation market and rethink its target marketing
decision. At this point, RC is offering one appeal— high quality — to all segments, thus
they are ignoring all cruise segments who do not consider high quality the most important
factor in choosing a cruise vacation.
2. Outline some steps Royal Caribbean can take to decide whether and how to target the
volume segment of the cruise market.
Royal Caribbean should first conduct market research both on its own clients and the
broader volume cruise market. The research needs to investigate the different
segmentation variables to provide RC with the information it needs to create a unique
brand image/identity for itself and satisfy the desires of the first time cruise passengers.
Demographic information is needed to identify age, income, marital status, and family
stage of first-time cruise passengers. This would provide information to determine the
substantiality and accessibility of the market as well as potential pricing options. RC also
needs behavioral segmentation information to identify a particular benefit(s) with which
to establish a competitive advantage in the market. Occasion usage information would be
helpful as well, both in timing supply and advertising. As the market appears to be
unconvinced of RC’s higher quality and service, information on buyer readiness would
be helpful. Finally, lifestyle analysis would be advantageous in designing cruise
activities and programs. All of this information is critical to develop a more focused and
effective target market strategy.
After its segmentation analysis, if RC decides it has a marketing opportunity with respect
to its high quality positioning, it should develop marketing strategies that will
communicate the idea more clearly to its target market. For example, RC might use the
slogan, “Royal Caribbean – where you always have fun and being treated as royalty will
make you return again and again.” RC might also name its ships in ways that convey the
royalty promise, e.g.. “The Royal Moon” for the married premium segment who wants to
relive their honeymoon and “The Treasure Ship” for the married couple with children
segment who want fun, games, and royal treatment.
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