chapter 6 customer-driven marketing strategy creating value for target customers

Chapter 6

Customer-Driven Customer-Driven Marketing StrategyMarketing Strategy

Creating Value for Creating Value for Target CustomersTarget Customers

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 6 - 2

1. Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

2. List and discuss the major bases for segmenting consumer and business markets.

3. Explain how firms identify attractive market segments and choose a market-targeting strategy.

4. Discuss how companies differentiate and position their products for maximum competitive advantage.

Rest Stop:Rest Stop: Previewing the ConceptsPreviewing the Concepts


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.

Best Buy – Serving the “Right” CustomersFirst Stop

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.


Designing a Customer-Driven Marketing Strategy

• Designing a true customer-driven marketing strategy involves:SegmentationTargetingDifferentiationPositioning


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.


Market Segmentation

• Geographic:NationsRegion of countryStatesCountiesCitiesNeighborhoods


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.


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.


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.


Market Segmentation

• Psychographic segmentation:Dividing a

market into different groups based on social class, lifestyle, or personality characteristics.

• Behavioral segmentation:Dividing buyers

into groups based on consumer knowledge, attitudes, uses, or responses to a product.


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.


• Behavioral segmentation:User status:

• Nonusers, ex-users, potential users, first-time users, regular users.

Usage rate: • Light, medium, heavy.

Loyalty status: • Brands, stores, companies.• Divide into groups by degree of loyalty.

Market Segmentation


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.


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.


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.


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.


Requirements for Effective Segmentation

• To be useful, market segments must be:MeasurableAccessibleSubstantialDifferentiableActionable


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.


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)


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.


Choosing a Targeting Strategy

• Factors to consider:Company resourcesProduct variabilityProduct’s life-cycle stageMarket variabilityCompetitors’ marketing strategies


• Smart targeting helps both companies and consumers.

• Marketing sometimes generates controversy and concern when targeting: Vulnerable, minority or disadvantaged

populationsChildren and teens

• Controversy arises when an attempt is made to profit at the expense of segments.

Socially Responsible Targeting


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.


• 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.




• 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.



• 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.



• Types of differentiation:Product differentiationServices differentiationChannels differentiationPeople differentiationImage differentiation



• 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.



• Worthwhile differences that could be promoted are: ImportantDistinctiveSuperiorCommunicablePreemptiveAffordableProfitable



• 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.


• 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.”



• 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.

Communicating and Delivering the Chosen Position


1. Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

2. List and discuss the major bases for segmenting consumer and business markets.

3. Explain how firms identify attractive market segments and choose a market-targeting strategy.

4. Discuss how companies differentiate and position their products for maximum competitive advantage.

Rest Stop: Reviewing the Concepts


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2011 Pearson Education, Inc. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

chapter 6 customer-driven marketing strategy creating value for target customers

Documents

segmentation strategy

pearson education

market segmentation

market segmentation

customer centricity

core customer segments

attractive market segments

marketing lists