principles of marketing (asian perspective) - chapter 7 customer driven marketing strategy

7/21/2019 Principles of Marketing (Asian Perspective) - Chapter 7 Customer Driven Marketing Strategy

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Chapter 7

CUSTOMER-DRIVEN MARKETING STRATEGY:

CREATING VALUE FOR TARGET CUSTOMERS

MARKETING STARTER: CHAPTER 7Estée Lauder: Catering to Specifc Customers

SynopsisEstée Lauder Companies is an expert at creating differentiated brands that serve the tastes of different

market segments. Its brand portfolio helps it to segment the market and target each with a specific value

proposition. The original Estée Lauder brand appeals to the more mature generation. Clinique is perfect for

the middleaged mom and for the !ounger women attracted to its classic free gift offers. "or !oung#fashionforward consumers# there$s %.&.C. "or ecoconscious consumers who want cosmetics made from

natural ingredients# there$s 'rigins. "or (ew &ge aromatherap! enthusiasts# there$s upscale &veda with its

salon# makeup# and lifest!le products. &ramis# a line of fragrances and grooming products for men was

launched in )*+, followed b! Lab -eries# a separate line of skin supplies in )*+. /eographicalsegmentation is also practiced. In China# the Estée Lauder Companies Innovation Center develops unique

local raw materials inspired b! traditional Chinese medicine0 in India# Estée Lauder$s C!ber 1hite skin

lightening range is cogni2ant of the trend favoring skin lightening and techsavv! 3apanese customers who

shop online are targeted using new technologies like mobile commerce. Estée Lauder understands that itcannot appeal to all bu!ers in the marketplace in the same wa! and therefore continues to focus on

customerdriven marketing strategies that build the right relationships with the right customers.

CHAPTER OVERVIEW

This chapter looks further into ke! customerdriven marketing strateg! decisions4howto divide up markets into meaningful customer groups 5 segmentation6# choose which

customer groups to serve 5targeting 6# create market offerings that best serve targetedcustomers 5differentiation6# and position the offerings in the minds of consumers

5 positioning 6.

Then# the chapters that follow explore the tactical marketing tools4the Four Ps 4b!

which marketers bring these strategies to life.

CHAPTER O!ECTIVES

). 7efine the four ma8or steps in designing a customerdriven marketingstrateg!9 market segmentation# market targeting# differentiation# and

positioning.

:. List and discuss the ma8or bases for segmenting consumer and business

markets.

;. Explain how companies identif! attractive market segments and choose amarket targeting strateg!.

,. 7iscuss how companies differentiate and position their products for maximum

competitive advantage.



CHAPTER OUTLINE

INTRODUCTION

"ew companies segment their markets better than Estée Lauder# an expert at creatingdifferentiated brands that serve the tastes of different market segments.

Estée Lauder uses a customerdriven segmentation strateg!# this strateg! draws onresearch that asserts a compan! should see itself as a portfolio of customers# not product

lines.

Estée Lauder$s customerdriven strateg! is working ver! well but the compan!

understands that it cannot appeal to all bu!ers and will not focus on promotional drives

and discounts in order to do so.

• Ope"#"$ V#$"ette %&e't#("'

). 7o !ou agree with Estée Lauder$s strateg! of segmenting its markets< 1h! or wh! not<

:. Is it possible that Estée Lauder might convert discount conscious consumers

into lo!al customers< If so# how<;. Think of another compan! that sells a product or service !ou en8o!. 1hat are

some possible wa!s that compan! might convert discount conscious

consumers into lo!al customers<

%ost companies have moved awa! from mass marketing and toward target marketing 4

identif!ing market segments# selecting one or more of them# and developing products andmarketing programs tailored to each.

"igure .) shows the four ma8or steps in designing a customerdriven marketing strateg!.

Market segmentation involves dividing a market into smaller groups of bu!ers

with distinct needs# characteristics# or behaviors that might require separate marketing

strategies or mixes.

Market targeting 5or targeting6 consists of evaluating each market segment$s

attractiveness and selecting one or more market segments to enter.

Dierentiation involves actuall! differentiating the firm$s market offering to create

superior customer value.

Positioning consists of arranging for a market offering to occup! a clear# distinctive#

and desirable place relative to competing products in the minds of target consumers.



MARKET SEGMENTATION

Through market segmentation# companies divide large# heterogeneous markets into

smaller segments that can be reached more efficientl! and effectivel! with products andservices that match their unique needs.

Se$)e"t#"$ C("'&)er Mar*et'

Table .) outlines the ma8or variables that might be used in segmenting consumer

markets.

Ge($raph#+ Se$)e"tat#("

Geographic segmentation calls for dividing the market into different

geographical units such as nations# regions# states# counties# cities# or even

neighborhoods.

De)($raph#+ Se$)e"tat#("

Demographic segmentation divides the market into groups based on variables

such as age# gender# famil! si2e# famil! life c!cle# income# occupation# education#

religion# race# generation# and nationalit!.

7emographic factors are the most popular bases for segmenting customer groups.

A$e a", L#e-C.+/e Sta$e means offering different products or using different marketing

approaches for different age and lifec!cle groups.

Gender segmentation has long been used in clothing# cosmetics# toiletries# and

maga2ines.

Income segmentation has long been used b! the marketers of products and

services such as automobiles# clothing# cosmetics# financial services# and travel.



P'.+h($raph#+ Se$)e"tat#("

Psychographic segmentation divides bu!ers into different groups based on

social class# lifest!le# or personalit! characteristics.

%arketers also use personality variables to segment markets.

eha0#(ra/ Se$)e"tat#("

eha!iora" segmentation divides bu!ers into groups based on their knowledge#

attitudes# uses# or responses to a product.

#ccasion segmentation means grouping bu!ers according to occasions when

the! get the idea to bu!# actuall! make their purchase# or use the purchased item.

e"e#t 'e$)e"tat#(" means grouping bu!ers according to the different benefits that the!

seek from the product.

U'er Stat&' means segmenting markets into nonusers# exusers# potential users# firsttime

users# and regular users of a product.

U'a$e Rate means grouping markets into light# medium# and heav! product users.

L(.a/t. Stat&' means dividing bu!ers into groups according to their degree of lo!alt!.

U'#"$ M&/t#p/e Se$)e"tat#(" a'e'

%arketers rarel! limit their segmentation anal!sis to onl! one or a few variables.

Se$)e"t#"$ &'#"e'' Mar*et'

Consumer and business marketers use man! of the same variables to segment their

markets.

=usiness marketers also use some additional variables# such as customer operating



characteristics# purchasing approaches# situational factors# and personal characteristics.

%an! marketers believe that buying behavior and benefits provide the best basis for

segmenting business markets.

Se$)e"t#"$ I"ter"at#("a/ Mar*et'

Companies can segment international markets using one or a combination of severalvariables.

• Geographic location: (ations close to one another will have man! common traits

and behaviors.

• Economic factors: Countries ma! be grouped b! population income levels# or b!

their overall level of economic development.

• Political and legal factors: T!pe and stabilit! of government# receptivit! to

foreign firms# monetar! regulations# and the amount of bureaucrac!.

• Cultural factors: /rouping markets according to common languages# religions#values and attitudes# customs# and behavioral patterns.

Intermarket segmentation is segmenting of consumers who have similar needs

and bu!ing behavior even though the! are located in different countries.

Re1&#re)e"t' (r Ee+t#0e Se$)e"tat#("

To be useful# market segments must be9

• Mea'&ra2/e9 The si2e# purchasing power# and profiles of the segments can bemeasured.

• A++e''#2/e9 The market segments can be effectivel! reached and served.

• S&2'ta"t#a/9 The market segments are large or profitable enough to serve.

• D#ere"t#a2/e9 The segments are conceptuall! distinguishable and respond

differentl! to different marketing mix elements and programs.

• A+t#("a2/e9 Effective programs can be designed for attracting and serving the

segments.

MARKET TARGETING

E0a/&at#"$ Mar*et Se$)e"t'

In evaluating different market segments# a firm must look at three factors9

). -egment si2e and growth

:. -egment structural attractiveness

;. Compan! ob8ectives and resources



The largest# fastestgrowing segments are not alwa!s the most attractive ones for ever!compan!. The compan! also needs to examine ma8or structural factors that affect long

run segment attractiveness.

•& segment is less attractive if it alread! contains man! strong and aggressivecompetitors.

• The existence of man! actual or potential substitute products ma! limit prices and

the profits.

• The relative power of buyers also affects segment attractiveness.

& segment ma! be less attractive if it contains powerful suppliers who can control prices.

Se/e+t#"$ Tar$et Mar*et Se$)e"t'

& target market consists of a set of bu!ers who share common needs or

characteristics that the compan! decides to serve. 5"igure .:6

U",#ere"t#ate, Mar*et#"$

>sing an undierentiated marketing 5or )a''-)ar*et#"$6 strateg!# a firm

might decide to ignore market segment differences and target the whole market with one

offer.

This massmarketing strateg! focuses on what is common in the needs of consumers

rather than on what is different .

D#ere"t#ate, Mar*et#"$

>sing a dierentiated marketing 5or 'e$)e"te, )ar*et#"$6 strateg!# a firm

decides to target several market segments and designs separate offers for each.

C("+e"trate, Mar*et#"$

>sing a concentrated marketing 5or "#+he )ar*et#"$6 strateg!# instead of

going after a small share of a large market# the firm goes after a large share of one or a

few smaller segments or niches.

It can market more effectively b! finetuning its products# prices# and programs to the

needs of carefull! defined segments.

It can market more efficiently# targeting its products or services# channels# and

communications programs toward onl! consumers that it can serve best and most

profitabl!.

M#+r()ar*et#"$



Micromarketing is the practice of tailoring products and marketing programs to suit

the tastes of specific individuals and locations.

%icromarketing includes local marketing and individual marketing .

Loca" marketing involves tailoring brands and promotions to the needs and wants

of local customer groups4cities# neighborhoods# and even specific stores.

Local marketing has drawbacks.

• It can drive up manufacturing and marketing costs b! reducing economies of

scale.

• It can create logistics problems.

• The brand$s overall image might be diluted if the product and message var! too

much in different localities.

I",#0#,&a/ )ar*et#"$ is the tailoring of products and marketing programs to the needs

and preferences of individual customers.

Individual marketing has also been labeled one-to-one marketing # mass customizationand markets-of-one marketing .

Ch(('#"$ a Tar$et#"$ Strate$.

1hich strateg! is best depends on9

• Compan! resources• ?roduct variabilit!

• ?roduct$s lifec!cle stage

• %arket variabilit!

• Competitors$ marketing strategies



S(+#a//. Re'p("'#2/e Tar$et Mar*et#"$

Target marketing sometimes generates controvers! and concern. Issues usuall! involve

the targeting of vulnerable or disadvantaged consumers with controversial or potentiall!

harmful products.

%arketers of a wide range of industries have been critici2ed for their marketing effortsdirected toward children.

?roblems arise when marketing adult products to kids# whether intentionall! or

unintentionall!.

The growth of the Internet and other carefull! targeted direct media has raised new

concerns about potential targeting abuses.

The issue is not so much who is targeted# but how and for what! Controversies arise whenmarketers attempt to profit b! unfairl! targeting vulnerable segments or target them withquestionable products or tactics.

-ociall! responsible marketing calls for segmentation and targeting that serve not 8ust theinterests of the compan!# but also the interests of those targeted.



DIFFERENTIATION AND POSITIONING

"alue proposition: @ow a compan! will create differentiated value for targeted segments

and what positions it wants to occup! in those segments.

& product$s position is the wa! the product is defined by consumers on important

attributes.

P('#t#("#"$ Map'

Per+ept&a/ p('#t#("#"$ )ap' show consumer perceptions of their brands versus

competing products on important bu!ing dimensions.

Ch(('#"$ a D#ere"t#at#(" a", P('#t#("#"$ Strate$.

The differentiation and positioning task consists of three steps9

). Identif!ing a set of differentiating competitive advantages upon which to build a position

:. Choosing the right competitive advantages

;. -electing an overall positioning strateg!

I,e"t#.#"$ P(''#2/e Va/&e D#ere"+e' a", C()pet#t#0e A,0a"ta$e'

To the extent that a compan! can differentiate and position itself as providing superior customer value# it gains competiti!e ad!antage.

It can differentiate along the lines of product # service# channel people# or image.

Ch(('#"$ the R#$ht C()pet#t#0e A,0a"ta$e'

H(3 Ma". D#ere"+e' t( Pr()(te

&d man Aosser Aeeves believes a compan! should develop a uni#ue selling proposition

5>-?6 for each brand and stick to it.

'ther marketers think that companies should position themselves on more than one

differentiator.

Wh#+h D#ere"+e' t( Pr()(te

& difference is worth establishing to the extent that it satisfies the following criteria9

$mportant: The difference delivers a highl! valued benefit to target bu!ers.



%istinctive: Competitors do not offer the difference# or the compan! can offer it in a

more distinctive wa!.

&uperior: The difference is superior to other wa!s that customers might obtain the

same benefit.

Communicable: The difference is communicable and visible to bu!ers. Preemptive: Competitors cannot easil! cop! the difference.

'ffordable: =u!ers can afford to pa! for the difference.

Profitable: The compan! can introduce the difference profitabl!.

Se/e+t#"$ a" O0era// P('#t#("#"$ Strate$.

The full positioning of a brand is called the brand$s !a"ue proposition. (seeFigure 7.4)

M(re (r M(re positioning involves providing the most upscale product or service andcharging a higher price to cover the higher costs.

M(re (r the Sa)e positioning involves introducing a brand offering comparable qualit!

but at a lower price.

The Sa)e (r Le'' positioning can be a powerful value proposition4ever!one likes a

good deal.

Le'' (r M&+h Le'' positioning is offering products that offer less and therefore cost

less.

BLess for much less positioning involves meeting consumers$ lower performance or

qualit! requirements at a much lower price.

M(re (r Le'' positioning is the winning value proposition.

In the long run# companies will find it ver! difficult to sustain such bestofboth

positioning.

De0e/(p#"$ a P('#t#("#"$ State)e"t

Compan! and brand positioning should be summed up in a p('#t#("#"$ 'tate)e"t.

The statement should follow the form9 (o )target segment and need* our )brand* is

)concept* that )point of difference*!

C())&"#+at#"$ a", De/#0er#"$ the Ch('e" P('#t#("

'nce it has chosen a position# the compan! must take strong steps to deliver andcommunicate the desired position to target consumers. &ll the compan!$s marketing mix

efforts must support the positioning strateg!.

principles of marketing (asian perspective) - chapter 7 customer driven marketing strategy

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