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Customer-Driven

Marketing Strategy

Creating Value for


Target Customers

Chapter 6
Rest Stop: Previewing the Concepts

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.

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First Stop
Best Buy – Serving the “Right” Customers
At Issue Implementation
• History: Increased • Ditching Demons: Deleted
competition from Wal-Mart demons from marketing lists,
and online retailers forced reduced promotions that tended
Best Buy to reexamine to attract them, instituted 15%
segmentation strategy and restocking fee.
positioning strategies. • Embracing Angels: Stocked
• Customer Centricity: more items, developed better
Adoption of this strategy service of interest to them.
forced Best Buy’s task force to Established Reward Zone
ID profitable “Angel” and loyalty program. Remodeled
costly “Demon” customers. stores to reflect core customer
Angels accounted for 20% of segments, trained clerks to ID
customers generating bulk of and cater to Angels’ shopping
profits. Demons were extreme preferences. Overall sales have
bargain hunters. 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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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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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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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 (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: segmentation:
 Dividing a  Dividingbuyers
market into into groups
different based on
groups based consumer
on social class, knowledge,
lifestyle, or attitudes, uses,
personality or responses to
characteristics. 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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Market Segmentation
• 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.

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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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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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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.

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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.
 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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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.
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Differentiation and Positioning

• Choosing a differentiation and


positioning strategy involves:
 Identifyinga 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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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:


 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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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. 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.

Copyright 2011, Pearson Education Inc. Publishing as Prentice-Hall 6 - 34