Introduction to Marketing

#6 Customer Driven Marketing Strategy

2014 Fall
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: Identified
profitable Angel and costly
Demon customers. Angels
accounted for 20% of customers
generating bulk of profits.
Demons were extreme bargain
hunters.
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 to
them. Established Reward Zone
loyalty program. Remodeled stores
to reflect Angels shopping
preferences.
VS.
Market Segmentation
Market Segmentation

Dividing a market into smaller groups with
distinct needs, characteristics, or behavior that
might require separate marketing strategies or
mixes
Market Targeting
Market Targeting

The process of evaluating each market
segments attractiveness and selecting one or
more segments to enter.
Positioning
Positioning

Arranging for a market offering to occupy a
clear, distinctive, and desirable place relative to
competing products in the minds of target
consumers.

Market Segmentation
Segmenting Consumer Markets

Market Segmentation
Market Segmentation
Geographic segmentation
Dividing a market into different geographical units such as
nations, provinces, regions, parishes, cities, or
neighborhoods.
Examples
World region or country: Western Europe, Middle East,
Pacific Rim, China, India, Canada, Mexico, North America
Country region: East Asia, South Asia, North Asia
Density: Urban, suburban, rural
Geographic segmentation
Colorado has a reputation for being a state of active and athletic people. According to
several studies, Coloradans have the lowest rates of obesity of any state in the US.
Former Colorado Governor Bill Ritter commented: As an avid fisherman and bike
rider, I know first-hand that Colorado provides a great environment for active, healthy
lifestyles,
Geographic segmentation
Southern Carolina food
Geographic segmentation
Walmart: They tailor their products to who the consumer is in the region. For
example, Wal-Marts in Colorado stock more organic items than they do in
Southern Carolina.
Demographic segmentation- The most popular bases
age, gender, family life cycle, income, occupation, education,
religion, race, generation, etc.
Examples
Age: Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+
Gender: Male, female
Family life cycle: Young and single; married with no children;
married with children
Income: Under $20,000; $20,000-$30,000;..$100,000-
$250,000; $250,000 and over
Market Segmentation
Market Segmentation
Kia Motors: The youthful Kia Soul Hamstar ads Target Millennials.

2013 Kia Soul Hamster Commercial Gangnam
http://www.youtube.com/watch?v=XvcdllFeFBY
Gender Segmentation
Neglected gender segments can offer new opportunities.
Harley-Davidson believes that many
women who read Vanity Fair will relate to
the strong, confident and independent
attitude of women riders, said Leslie
Prevish, womens outreach manager for
Harley-Davidson. The images in the
section showcase Harley-Davidsons
tradition of life-changing freedom,
adventure, and camaraderie on the open
road, and underscore the Motor
Companys declaration of Women Riders
Month and its initiative to encourage
100,000 women to learn to ride.
Gender Segmentation
Income Segmentation
Many retailers-such as pound and dollar stores-
successfully target low- and middle-income groups.
The core market for such stores is families with
incomes under $30,000.
History: Founded by Tony Fernades. He bought out a failing
airline company in Malaysia in 2001.

Implementation
Segmentation: divided customers based on their price
sensitivity
Targeting: targeted price-conscious customers
Positioning: low-fare but safe and customer focused
airline (e.g. friendly and personal service, online booking,
etc.)

Income Segmentation
Market Segmentation
Psychographic segmentation
Divides a market into different groups based on social
class, lifestyle, or personality characteristics.
Examples
Social class: Lower lowers, upper lowers, working class,
middle class, lower uppers, upper uppers
Lifestyle: Achievers, strivers, survivors
Personality: Compulsive, outgoing, authoritarian,
ambitious
Lifestyle Segmentation
Quiksilver, Inc. markets products across three core brands: Quiksilver, Roxy and DC,
as well as several smaller brands.

Roxy focuses mainly on the beach lifestyle and is generally more popular in beach
towns. Roxy is a brand that appeals to girls who are fearless, active and fashion
conscious.
Market Segmentation
Behavioral segmentation
Dividing a market into groups based on consumer
knowledge, attitudes, uses, or responses to a product.

Examples
Occasions: Regular occasion; special occasion; holidays;
seasonal
Benefits: Quality, service, economy, convenience,
speed
User status: Nonuser, ex-user, potential user, first-time
user, regular user
User rates: Light user, medium user, heavy user
Occasion Segmentation
http://www.marshmallowpeeps.com/

Peeps creates different shaped marshmallow treats for special holidays
when it captures most of its sales but advertises that Peeps are Always in
Season to increase the demand for non-holiday occasions.
Occasion Segmentation
Interestingly, Pepsi at one time was trying to
market a cola product for breakfast.
This made sense to the company since many
people eat breakfast at a fast food restaurant
such as McDonald's or Burger King.
However, most people do not think cola
beverages make sense for breakfast and the
product did not succeed.
Occasion Segmentation
Benefit segmentation of Roxy: those who surf and live in warm weather, those
who ski or snowboard and live in cold weather, and lastly those who look to Roxy for
everyday fashion.
Benefit Segmentation
Benefit Segmentation
Toothpaste offers three distinct benefits, each of which will appeal to a different
audience segment.
One benefit relates to a tooth decay deterrent; the second, to a tooth whitener; and
the third, to a mouth freshener.
Benefit Segmentation
Soothe stressed and sensitive skin with
Origins new Mega-Mushroom Skin Relief
collection, specially formulated by Dr.Andrew
Weil to combat irritations that can lead to
ageing.
Origins, the natural skin care
brand Powered by Nature and
Proven by Science, reveals a new,
innovative approach to addressing
regularly dry skin.
Segmentation of International Markets
Intermarket (cross-market) segmentation
Forming segments of consumers who have similar needs
and buying behavior even though they are located in
different countries.
Segmentation of International Markets
Pepsi: International "cool" ad
The 2010 FIFA World Cup was held in South Africa.
Pepsi focused on this major interest and subgroup by depicting players
from a variety of teams and nations playing soccer around the world
while drinking Pepsi.
Pepsi reached many more people and cultures with a single ad
campaign.

http://uwmktg301.blogspot.hk/2010/01/intermarket-segmentation.html
http://www.youtube.com/watch?v=IxRXuMgzszc
http://www.youtube.com/watch?v=4BweWxbKxpA
Coca-Cola unveiled its London 2012 Olympics marketing plan, with an integrated
campaign called "Move to the Beat."
It was inspired by the sounds, spirit and culture of the host city, targeting teens
through music.
The goal of Move to the Beat is to engage the world's youth in the Olympic Games
and in sports in general.
http://www.youtube.com/watch?v=w9_ZRqtZmTI
Coca-Cola: Worlds teen
Segmentation of International Markets
IKEA: global middle class
The global middle class that Ikea targets shares buying habits. The $120 Billy
bookcase, $13 Lack side table, and $190 Ivar storage system are best-sellers
worldwide. Spending per customer is even similar. According to Ikea, the figure in
Russia is $85 per store visit -- exactly the same as in affluent Sweden.
http://www.businessweek.com/stories/2005-11-13/ikea
More Ideas about Innovative Products
Market Targeting
Market Targeting
Target market = A set of buyers sharing common
needs or characteristics that the company decides to
serve.
Market Targeting
Evaluating Market Segment
Three factors:
Segment size and growth
Segment structural attractiveness: competitors,
substitute products, power of buyers, powerful
suppliers
Company objectives and resources
Market Targeting
Selecting Target Market Segments
Company must decide which and how many
segments it will target.
Target selection strategies:
Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing
Micromarketing
Target Selection Strategies
Undifferentiated (mass) Marketing
A market-coverage strategy in which a firm decides
to ignore market segment differences and go after
the whole market with one offer.

Focuses on what is common in the needs of
consumers rather than on what is different.
Target Selection Strategies
Basic commodities
Differentiated (segmented) Marketing
A market-coverage strategy in which a firm decides
to target several market segments and designs
separate offers for each.

Target Selection Strategies
Five major segments:
1. Jeanswear

2. Imagewear (workwear)

3. Outdoor

4. Sportswear

5. Contemporary Brands
Target Selection Strategies
VF Corporation
offers top-of-the-line gear and apparel
for diehard outdoor enthusiasts,
especially those who prefer cold weather activities
creates
footwear,
apparel and
accessories
for skate,
surf and
snowboard
ers the
world over
supplies premium denim and accessories sold in
boutiques and high-end department stores
focuses on people who enjoy
high-end casual apparel
inspired by sailing and the sea.
Nautica products offer refined, casual classics
that are always crisp, clean and distinct.

produce the highest-quality athletic wear
and do it for every Major League Baseball club,
the National Basketball Association,
most major colleges and universities,
and sports fans everywhere
Target Selection Strategies
Concentrated (niche) Marketing
A market-coverage strategy in which a firm goes after
a large share of one or few segments or niches.
lets smaller companies focus their limited resources
on serving niches that may be unimportant to or
overlooked by larger competitors.
Firms can achieve a strong market position because
of its greater knowledge of consumer needs in the
niche it serves and special reputation it acquires.
Whole Foods Market offers organic, natural, and gourmet
foods where Wal-Marts cant serve well. The company has
been ranked among the most socially responsible businesses
and placed fifth on the U.S. Environmental Protection
Agency's list of Top 25 Green Power Partners
Target Selection Strategies
Target Selection Strategies
Small businesses are realizing riches from serving
small niches on the Web.

Web niching is paying off handsomely for Zappos,
which began selling shoes onlineonly shoes and
only online
Target Selection Strategies
Micromarketing
The practice of tailoring products and marketing
programs to the needs and wants of specific
individuals and local customer groups-includes local
marketing and individual marketing.
Local Marketing
Tailoring brands and promotions to the needs and
wants of local customer groups
Target Selection Strategies: Micromarketing
Individual Marketing
Tailoring products and marketing programs to the
needs and preferences of individual customers-also
labeled one-to-one marketing, customized
marketing, and markets-of-one marketing.
Target Selection Strategies: Micromarketing
MINI uses personalized billboard messages to greet
MINI drivers in selected cities. As the new MINI
owners passes by, the personalized key fob contacts
the billboard database, which then transmits a
message automatically.
Target Selection Strategies: Micromarketing
MINI is a small economy car that was made by the British Motor Corporation (BMC)
Target Selection Strategies: Micromarketing
Nikes NikeID program lets users choose shoes
materials, personalize colors, imprint text on the heels,
and even size the left and right shoes differently.
Marketing Targeting Strategies
Undifferentiated
(mass) marketing
Differentiated
(segmented)
marketing
Concentrated
(niche) marketing
Micro(local or
individual)
marketing
Targeting
broadly
Targeting
narrowly
Differentiation and Positioning
Product Position
The way the product is defined by consumers on
important attributes--the place the product occupied
in consumers minds relative to competing products.

Products are created in the factory, but brands are
created in the mind.
Product Position Samples
Tide:
a powerful, all-purpose family detergent
Ivory:
the gentle detergent for fine washables and baby
clothes
Subway:
eat fresh
Mercedes and Cadillac:
luxury
Porsche and BMW:
performance

Volvo:
safety


Toyotas fuel-efficient
Hybrid Prius: high-tech solution
to the energy shortage

Product Position Samples
Product Position
Consumers position products with or without the
help of marketers.

Marketers must
Plan positions that will give their products the
greatest advantage in selected target markets
Design marketing mixes (4Ps) to create these
planned positions.
Positioning Maps
Perceptual positioning maps show consumer
perceptions of their brands versus competing
products on important buying dimensions.

Important buying dimension:
Price
Quality
Service Environment/ location
Choice of products/services
Positioning Maps: U.S. Large Luxury Sport Utility Vehicle Market
Lincoln Navigator
Cadillac Escalade Cadillac Escalade ESV Hummer H1
Hummer H2 Infiniti QX56 Range Rover
Lexus LX470 Toyota Land Cruiser
Positioning Maps: U.S. Large Luxury Sport Utility Vehicle Market
160
40
120
80
luxury Performance
Price (thousands of $)
Escalade
Escalade ESV
Hummer H1
Hummer H2
Infiniti QX56
Range Rover
Lexus LX470
Navigator
Land Cruiser
*The location of each circle shows where consumers position a brand on two dimensions: price
and luxury-performance orientation. Size for each circle indicates the brands relative market
share in the segment.
Choosing a Differentiation and Positioning Strategy
A brands positioning must serve the needs and preferences
of well-defined target markets.

3 steps of differentiation and positioning task:
1) Identifying a set of differentiating competitive advantages
upon which to build a position
2) Choosing the right competitive advantages
3) Selecting an overall positioning strategy

Then the company must effectively communicate and deliver
the chosen position to the market
1) Identifying Possible Value Differences and Competitive Advantages
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.
To find points of differentiation, marketers must
think through the customers entire experience with
the companys product or service.
It can differentiate along the line of product,
services, channels, people, or image.
Product Differentiation
Brands can be differentiated on features,
performance, or style and design.

Bose positions its speakers on the striking design and
sound characteristics.
Panasonic positions its Toughbook PCs, designed to
stand up to rugged use on the road or in the field, as
durable, reliable, wirelessprotect your work no
matter where you work.
http://www.youtube.com/watch?v=pKIY3xJqibA
Product Differentiation
There are two types of product differentiation:

1. Horizontal: Goods are different but at the same
price some consumers will buy one and some will
buy other, it really depends on their preferences.
2. Vertical: Goods are different and all consumers
would prefer one to the other if they were sold at
the same price. Goods are of different qualities.
Examples of horizontal product differentiation:

Breakfast cereals may have lots of sugar or may be healthier.
We may order them one a line according to their sugar
content. Consumers have different tastes for sugar and
therefore at same prices they will buy those cereals that are
closer to their taste.
Product Differentiation
Examples of vertical product differentiation:
Different computer processors Pentium III versus
Pentium IV

BMW versus Fiat


Pharmaceutical branded good and generics

Regular cell phone versus blackberry
Product Differentiation
Product Differentiation
SAP is a German multinational software corporation that makes enterprise software
to manage business operations and customer relations.
Product Differentiation
Swedish Postal X'mas Cards
Service Differentiation
Some companies gain service differentiation through
speedy, convenient, or careful delivery.
Singapore Airlines sets itself apart through
extraordinary customer care and the grace of its
flight attendants.
Channel Differentiation
Firms that practice channel differentiation gain
competitive advantage through the way they design
their channels coverage, expertise, and
performance.

Amazon.com and GEICO set themselves apart with
their smooth functioning direct channels.
http://www.youtube.com/watch?v=j09NaR_0-aQ
People Differentiation
Companies can hire and train better people than
their competitors do. People differentiation requires
company select its customer-contact people carefully
and train them well.

Singapore Airlines has an excellent reputation,
largely because of the grace of its flight attendants.
Image Differentiation
A company brand image should convey the
products distinctive benefits and positioning.
Developing a strong and distinctive image cannot do
overnight using a few advertisements.
2) Choosing the Right Competitive Advantages
How Many Differences to Promote?

Many marketers think that companies should
aggressively promote only one benefit (unique
selling proposition: USP) to the target market.
Buyers tend to remember number one better, esp. in
this overcommunicated society.
2) Choosing the Right Competitive Advantages
Which Differences to Promote?
Not every difference make a good differentiator.
A difference is worth establishing to the extent that it
satisfies the following criteria:
Important: the difference delivers a highly valued
benefit to target buyers
Distinctive: competitors dont offer the
difference, or company can offer it in a more
distinctive way.
Superior: the difference is superior to other ways
that customers might obtain the same benefit.
Also the following:
Communicable: the difference is communicable and
visible to buyers
Preemptive: competitors cant easily copy the
difference.
Affordable: Buyers can afford to pay for the
difference.
Profitable: the company can introduce the difference
profitably.
2) Choosing the Right Competitive Advantages
3) Selecting an Overall Positioning Strategy
Value proposition: the full mix of benefits upon
which it is positioned. It is the answer to the
customers question why should I buy your brand?
Volvos value proposition: safety also include
reliability, roominess, and styling, all for a price that
is higher than average but seems fair for this mix of
benefits.
Developing a Positioning Statement
Positioning statement:
A statement that summarizes company or brand
positioningit takes this form: To (target segment
and need) our (brand) is (concept) that (point-of-
difference).
Developing a Positioning Statement
Show its point of
difference from
other members of
the category
State the products
membership in a
category
Group Homework: Case Study
Due on October 20
No more than 5 pages double-spaced (excluding tables and graphs,
appendix)
Word document (no pdf) so I can give you comments on the file

1) What changes are occurring in the nondisposable razor category? Assess
Paramounts competitive position. What are the strategic life cycle challenges for
Paramounts current products as well as for Clean Edge?

2) How is the nondisposable razor market segmented? Examine consumer behavior
for nondisposable razors.

3) What are the arguments for launching Clean Edge as (1) a niche product and (b) a
mainstream brand? Which would you recommend? What are strategic implications
of your recommendation? first state the pros and cons of each plan
FOCUS ON THE LOGIC X one over another sound arguments?
4) Based on your positioning strategy, what brand name and marketing budget
allocations would you advise?
Group Homework: Case Study
NEED TO BE CLEAR on HEADINGS AND SUB-HEADINGS