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PRINCIPLES OF MARKETING
University of Management and Technology
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Module 6: Customer-Driven
Marketing Strategy: Creating Value
for Target Customers
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Copyright Warning
This presentation is the intellectual property of Pearson Education
Inc. 2011. Students are hereby advised that they may not copy or
distribute this work to any third party
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Rest Stop: Previewing the Concepts
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.
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Discuss how companies differentiate and position their products for
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maximum
competitive advantage.
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First Stop
Best Buy – Serving the “Right” Customers
At Issue
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Implementation
History: Increased competition
from Wal-Mart and online retailers
forced Best Buy to reexamine
segmentation strategy and
positioning strategies.
Ditching Demons: Deleted
demons from marketing lists,
reduced promotions that tended to
attract them, instituted 15%
restocking fee.
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.infoDemons were extreme
bargain hunters.
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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Figure 6.1:
Designing a Customer-Driven Marketing Strategy
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Segmentation
Dividing a market into smaller
segments with distinct needs,
characteristics, or behaviors
that might require separate
marketing strategies or mixes.
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Demographic, geographic, psychographic
and behavioral characteristics are used.
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Marketing in Action
No single way to
segment is best.
Variables are
often combined
to better define
segments.
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Market Segmentation
Geographic:
Nations
Region of
country
States
Counties
Cities
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Neighborhoods
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Marketing in Action
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Zipcar targets densely populated metro areas and
congested college campuses where their car-sharing
services are most needed.
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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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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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Market Segmentation
Gender:
Neglected gender segments
can offer new opportunities.
12% of new Harley-Davidson
purchases are now made by
women.
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Market Segmentation
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.
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Marketing in Action
The Benjamin Hotel’s provides dogs of
wealthy owners with canine room
service, dog bathrobes, a variety of
dog bed styles, DVDs for dogs, and
access to a Pet Psychic.
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Market Segmentation
Psychographic segmentation:
Behavioral segmentation:
Dividing a market into different
groups based on social class,
lifestyle, or personality
characteristics.
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 labels and
promotions for holidays.
Special products for special
occasions.
Benefits sought:
Different segments desire
different benefits from
products.
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Fuel for Thought
Consumers don’t always buy the least expensive offering in a given product
category, particularly when they are seeking certain benefits.
What other benefits – aside from saving money – might car owners seek
when shopping for insurance? Can you think of an auto insurance
provider that targets consumers who seek those benefits?
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Marketing in Action
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Peeps creates different shaped marshmallow treats for special
holidays as part of its occasion segmentation strategy.
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Market Segmentation
Behavioral segmentation:
User status:
Nonusers, ex-users, potential users, firsttime users, regular users.
Usage rate:
Light, medium, heavy.
Loyalty status:
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Brands, stores, companies.
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Divide into groups by degree of loyalty.
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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.
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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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Marketing in Action
Learn more about Prizm by
watching the USA Today’s flash
presentation related to market
segmentation.
Then visit the zip code lookup to see
what Prizm says about your
neighborhood!
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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:
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Forming segments of consumers who
have similar needs and buying behavior
even though they are located in
different countries.
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Marketing in Action
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Ikea targets the aspiring global middle class by selling good-quality furniture
that ordinary people worldwide can afford.
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Requirements for Effective Segmentation
To be useful, market segments must be:
Measurable
Accessible
Substantial
Differentiable
Actionable
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The “lefty” segment is
difficult to measure
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Market Targeting
Market targeting involves evaluating and selecting marketing
segments.
Market evaluation considers:
Segment size
The largest segment isn’t always best.
Segment structural attractiveness
Competition, substitute products, power of buyers and suppliers are
examined.
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Fit with company objectives
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Company resources.
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Figure 6.2:
Marketing Targeting Strategies
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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.
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Micromarketing
(local or individual marketing)
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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.
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Fuel for Thought
Coupling phone services with
GPS devices provides
marketers with a way to target
location specific offers to
consumers wherever they
might be.
Why aren’t more marketers
embracing mobile marketing?
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Marketing in Action
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The ultimate in individual marketing: video screens in some stores
can determine who’s watching them and change ads accordingly.
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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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Marketing in Action
Although Victoria’s Secret targets its Pink
line of young, hip, and sexy clothing to
women 18-30 years old, critics charge that
Pink is being worn by girls as young as age
11.
Should Victoria’s Secret take action to
stop selling Pink to girls under the age of
18? Why or why not?
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Positioning
The way the product is
defined by consumers on
important attributes—the
place the product occupies
in consumers’ minds relative
to competing products.
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Perceptual positioning maps can help define
a brand’s position relative to competitors.
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Figure 6.3:
Positioning Map for Large Luxury SUVs
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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
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People
differentiation
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Consumers value customer service
Image differentiation
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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.
The challenge is to convince consumers that one brand can do it all.
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Differentiation and Positioning
Worthwhile differences that could be promoted are:
Important
Distinctive
Superior
Communicable
Preemptive
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Affordable
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Profitable
Evaluate against the criteria at left
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Marketing in Action
Positioning should make a brand
stand out from the rest of the pack.
As a late entrant into the small city
car market in 2009, Nissan chose to
position the Cube as a “personal
mobile device” rather than on the
basis of affordability or
customization (attributes the Cube
shared with the competition).
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Figure 6.4:
Possible Value Propositions
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Overall or full positioning of the brand is called the brand’s
value proposition.
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Marketing in Action
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Less for much less positioning in action: Southwest is a
no frills, low-price airline whose employees go the extra mile to amuse, surprise,
and entertain passengers.
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Differentiation and Positioning
Developing a positioning statement:
Format: “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.”
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Marketing in Action
DiGiornio’s pizza positions itself against
delivered pizzas, rather than other store
bought frozen pizzas. The firm uses the
“No tipping. No kidding. It’s not
delivery, it’s DiGiornia!” slogan to
promote its points of difference.
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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.
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Rest Stop: Reviewing the Concepts
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.
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Discuss how companies differentiate and position their products for
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maximum
competitive advantage.
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