Download Chapter 6

Customer-Driven
Marketing Strategy
Creating Value for
Target Customers
Chapter 6
Rest Stop: Previewing the Concepts
1.
2.
3.
4.
Define the major steps in designing a
customer-driven marketing strategy: market
segmentation, targeting, differentiation, and
positioning.
List and discuss the major bases for
segmenting consumer and business markets.
Explain how firms identify attractive market
segments and choose a market-targeting
strategy.
Discuss how companies differentiate and
position their products for maximum
competitive advantage.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6-2
First Stop
Best Buy – Serving the “Right” Customers
•
•
At Issue
History: Increased
competition from Wal-Mart
and online retailers forced
Best Buy to reexamine
segmentation strategy and
positioning strategies.
Customer Centricity:
Adoption of this strategy
forced Best Buy’s task force to
ID profitable “Angel” and
costly “Demon” customers.
Angels accounted for 20% of
customers generating bulk of
profits. Demons were extreme
bargain hunters.
•
•
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
Implementation
Ditching Demons: Deleted
demons from marketing lists,
reduced promotions that tended
to attract them, instituted 15%
restocking fee.
Embracing Angels: Stocked
more items, developed better
service of interest to them.
Established Reward Zone
loyalty program. Remodeled
stores to reflect core customer
segments, trained clerks to ID
and cater to Angels’ shopping
preferences. Overall sales have
doubled; early customer centric
stores outsold traditional.
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Designing a Customer-Driven
Marketing Strategy
• Designing a true customer-driven
marketing strategy involves:
 Segmentation
 Targeting
 Differentiation
 Positioning
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6-4
Market Segmentation
• Segmentation:
 Dividing
a market into smaller segments with
distinct needs, characteristics, or behaviors that
might require separate marketing strategies or
mixes.
• Key variables:
 Geographic
 Demographic
 Psychographic
 Behavioral
• No single way to segment is best. Variables are
often combined to better define segments.
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6-5
Market Segmentation
• Geographic:
 Nations
 Region
of country
 States
 Counties
 Cities
 Neighborhoods
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Market Segmentation
• Demographic:
 Age,
gender, family size, family life
cycle, income, occupation, education,
race, religion, generation, nationality.
 The most popular bases for segmenting
customer groups as needs, wants, and
usage often vary by demographics.
 Easier to measure than most other
types of variables.
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6-7
Market Segmentation
• Age and life-cycle stage addresses
the fact that consumer needs and
wants change with age.
 Avoid
stereotypes in promotions based
on age.
 Promote positive messages when
marketing to mature consumers.
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6-8
Market Segmentation
• Gender:
 Neglected
gender segments can offer new
opportunities (Harley Davidson & women).
• Income:
 Identifies
and targets the affluent for luxury
goods.
 People with low annual incomes can be a
lucrative market.
 Troubled economy makes marketing to all
income groups a challenge.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6-9
Market Segmentation
• Psychographic
• Behavioral
segmentation:
 Dividing
a
market into
different
groups based
on social class,
lifestyle, or
personality
characteristics.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
segmentation:
 Dividing
buyers
into groups
based on
consumer
knowledge,
attitudes, uses,
or responses to
a product.
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Market Segmentation
• Behavioral segmentation:
 Occasion
segmentation:
• Special promotions and labels for holidays.
• Special products for special occasions.
 Benefits
sought:
• Different segments desire different benefits
from products.
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6 - 11
Market Segmentation
• Behavioral segmentation:
 User
status:
• Nonusers, ex-users, potential users, firsttime users, regular users.
 Usage
rate:
• Light, medium, heavy.
 Loyalty
status:
• Brands, stores, companies.
• Divide into groups by degree of loyalty.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 12
Market Segmentation
• Best to use multiple segmentation
bases in order to identify smaller,
better-defined target groups.
 Start
with a single base and then
expand to other bases.
 Multivariable segmentation systems
such as PRIZM NE are becoming more
common.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 13
Market Segmentation
• PRIZM NE:
 Multivariable
segmentation systems
developed by Claritas, Inc.
 Potential Rating Index for Zip Markets
(PRIZM NE).
 Based on U.S. census data.
 Classifies U.S. households into 66
clusters or segments within 14 different
social groups.
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Segmenting Business Markets
• Consumer and business markets use
many of the same variables for
segmentation.
• Business marketers can also use:
 Operating
characteristics.
 Purchasing approaches.
 Situational factors.
 Personal characteristics.
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Segmenting International Markets
• Factors used:
 Geographic
location.
 Economic factors.
 Political and legal factors.
 Cultural factors.
• Intermarket segmentation:
 Forming
segments of consumers who have
similar needs and buying behavior even
though they are located in different countries.
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Requirements for Effective
Segmentation
• To be useful, market segments must
be:
 Measurable
 Accessible
 Substantial
 Differentiable
 Actionable
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6 - 17
Market Targeting
• Market targeting involves:
 Evaluating
marketing segments.
• Segment size, segment structural
attractiveness, and company objectives
and resources are considered.
 Selecting
target market segments.
• Alternatives range from undifferentiated
marketing to micromarketing.
 Being
socially responsible.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 18
Selecting Target Market Segments
• Targeting strategies include:
 Undifferentiated
(mass) marketing:
• Ignores segmentation opportunities.
 Differentiated
(segmented) marketing:
• Targets several segments and designs separate
offers for each.
 Concentrated
(niche) marketing:
• Targets one or a couple small segments.
 Micromarketing
(local or individual marketing)
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6 - 19
Micromarketing
• Tailoring products and marketing
programs to suit the tastes of specific
individuals and locations.
 Local
marketing: Tailoring brands and
promotions to the needs and wants of local
customer groups—cities, neighborhoods,
specific stores.
 Individual marketing: Tailoring products and
marketing programs to the needs and
preferences of individual customers.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 20
Choosing a Targeting Strategy
• Factors to consider:
 Company
resources
 Product variability
 Product’s life-cycle stage
 Market variability
 Competitors’ marketing strategies
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Socially Responsible Targeting
• Smart targeting helps both companies
•
and consumers.
Marketing sometimes generates
controversy and concern when targeting:
 Vulnerable,
minority or disadvantaged
populations
 Children and teens
• Controversy arises when an attempt is
made to profit at the expense of
segments.
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Differentiation and Positioning
• A product’s 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.
 Perceptual positioning maps can help
define a brand’s position relative to
competitors.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 23
Differentiation and Positioning
• Choosing a differentiation and
positioning strategy involves:
 Identifying
a set of differentiating
competitive advantages on which to
build a position.
 Choosing the right competitive
advantages.
 Selecting an overall positioning strategy.
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Differentiation and Positioning
• Competitive advantage:
 An
advantage over competitors gained
by offering greater customer value,
either through lower prices or by
providing more benefits that justify
higher prices.
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Differentiation and Positioning
• Identifying possible value differences
and competitive advantages:
 Key
to winning target customers is to
understand their needs better than
competitors do and to deliver more
value.
 Finding points of differentiation requires
that marketers examine the entire
customer experience.
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Differentiation and Positioning
• Types of differentiation:
 Product
differentiation
 Services differentiation
 Channels differentiation
 People differentiation
 Image differentiation
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6 - 27
Differentiation and Positioning
• Choosing the right competitive
advantage requires selecting how
many and which differences to
promote.
 Unique
selling proposition is often
preferred.
 Promoting multiple differences is
possible.
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Differentiation and Positioning
• Worthwhile differences that could be
promoted are:
 Important
 Distinctive
 Superior
 Communicable
 Preemptive
 Affordable
 Profitable
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Differentiation and Positioning
• Overall or full positioning of the brand is
•
called the brand’s value proposition.
Potential value propositions include:
 More
for more: More benefits for higher price.
 More for same: More benefits for the same price.
 More for less: More benefits for a lower price.
 Same for less: Same benefits for a lower price.
 Less for much less: Fewer benefits for much
lower price.
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Perceptual Map
Differentiation and Positioning
• Developing a positioning statement:
“To (target segment and need)
our (brand) is (a concept) that (point of
difference).”
 Example: “To busy mobile
professionals who need to always be in
the loop, BlackBerry is a wireless
connectivity solution that gives you an
easier, more reliable way to stay
connected to data, people, and
resources while on the go.”
 Format:
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Communicating and Delivering the
Chosen Position
• Company must take strong steps to
deliver and communicate the desired
position to target consumers.
 The
marketing mix efforts must deliver
the positioning strategy.
• Firm must also monitor and adapt the
position over time to match changes
in consumer needs and competitors’
strategies.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 33
Rest Stop: Reviewing the Concepts
1.
2.
3.
4.
Define the major steps in designing a
customer-driven marketing strategy: market
segmentation, targeting, differentiation, and
positioning.
List and discuss the major bases for
segmenting consumer and business markets.
Explain how firms identify attractive market
segments and choose a market-targeting
strategy.
Discuss how companies differentiate and
position their products for maximum
competitive advantage.
Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall
6 - 34