Customer-Driven Marketing Strategy

Objectives• Define the four major steps in designing a

customer-driven market strategy: market segmentation, market targeting, differentiation, and positioning

• List and discuss the major bases for segmentation• Explain how companies identify attractive market

segmentation and choose a market targeting strategy.

• Discuss how companies position their products for maximum competitive advantage in the marketplace

Topic Outline

• Market Segmentation• Market Targeting• Differentiation and Positioning

Marketing Strategy

• Once the best opportunity to satisfy unfulfilled customer needs is identified, a strategic plan for pursuing the opportunity can be developed.

• Marketing strategy involves:– Segmentation– Targeting (target market selection)– differentiation– Positioning the product within the target market

Market Segmentation

• Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs

Market Segmentation

• The process of dividing a market into distinct groups of buyers on the basis of needs, characteristics, or behavior

• Segmentation allows the company to better satisfy the needs of its customers

Market Segmentation

When segmentation is done right, you get the highest return for your marketing

expenditure

Market Segmentation Segmenting Consumer Markets

Geographic segmentation

Demographic segmentation

Psychographic segmentation

Behavioral segmentation

Geographic segmentation

• Marketing mixes are customized geographically

• Geographic Segmentation VariablesGeographic Segmentation Variables– World Region or Country– State– City – City or Metro Size– Density– Climate

Demographic segmentation

• Demographic segmentation divides the market into groups based on variables such as age, gender, family size, income, occupation, education, religion, race, generation, and nationality

Demographic segmentation

Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups

Gender segmentation divides the market based on sex (male or female)

Income segmentation divides the market into affluent or low-income consumers

Psychographic segmentation

• Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits.

• People in the same demographic group can have very different psychographic characteristics

Psychographic segmentation

• Lifestyle– Different people have different lifestyle

patterns and our behaviour may change as we pass through different stages of life. 

Swatch targets those with an active lifestyle

Behavioral segmentation

• Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product

• Behavioral Segmentation VariablesBehavioral Segmentation Variables– Occasions– Benefits– User Status– Usages Rate– Loyalty Status– Attitude Toward the Product

Behavioral segmentation

• Dividing a market into groups based on consumer knowledge, attitude, use , or response to a product

• Behavioral Segmentation VariablesBehavioral Segmentation Variables– Occasions– Benefits– User Status– Usages Rate– Loyalty Status– Attitude Toward the Product

Fig: Applying benefit segmentation to office FurnitureAd at left targets businesspeople who are interested in comfort, while the one at the right targets businesspeople who are attracted to symbol of success

Segmenting Business Markets

Segmenting Business Markets• Demographic segmentation

– Industry, company size, location

• Operating variables– Technology, usage status, customer capabilities

• Purchasing approaches• Situational factors

– Urgency, specific application, size of order

• Personal characteristics– Buyer-seller similarity, attitudes toward risk, loyalty

Segmenting International Markets

• Geographic segmentation– Location or region

• Economic factors– Population income or level of economic development

• Political and legal factors– Type / stability of government, monetary regulations,

amount of bureaucracy, etc.

• Cultural factors– Language, religion, values, attitudes, customs,

behavioral patterns

Segmentation Criteria

• Criteria that assist us within segmentation– Is the segment viable? Can we make a profit

from it?– Is the segment accessible? How easy is it for

us get into the segment– Is the segment measurable? Can we obtain

realistic data to consider its potential

Requirements for Effective Segmentation

• Differentiable (Distinct)– is each segment clearly different from other segments?

• Accessible– can buyers be reached through appropriate promotional

programmes and distribution channels?• Measurable

– is the segment easy to identify and measure?• Substantial

– is the segment sufficiently large to provide a stream of constant future revenues and profits?

• Actionable– Effective programs can be designed for attracting and serving the

segment.

Targeting(Target Market Selection)

Target Market Selection

• Market:Market: – People or institutions with sufficient

purchasing power, authority, and willingness to buy

• Target market:Target market: – Specific segment of consumers most likely to

purchase a particular product• Set of buyers sharing common needs or

characteristics that the company decide to serve

Target Marketing

• Contrasts with mass marketing– Offer single product to the entire market.

• Evaluating each market segment’s attractiveness and selecting one or more segment to enter.

Target Marketing

• Evaluating Market Segments– Segment size and growth– Segment structural attractiveness

• Level of competition

• Substitute products

• Power of buyers

• Powerful suppliers

– Company objectives and resources

Targeting (Target Market Selection)

Suitability of Market Segments to the Company• Evaluation according to how segment fit the

company objectives, resources, and capabilities.– Whether the company can offer superior value to

the customer in the segment– The impact of serving the segment on the firm’s

image– Access to distribution channels required to serve

the segment

Target Marketing Strategies

Target Marketing Strategies

Undifferentiated marketing targets the whole market with one offer– Mass marketing (homogeneous demand)– Focuses on common needs rather than what’s

different– Before choosing this strategy should ensure the

availability of resources for mass production, mass distribute, and mass advertise.

Target Marketing Strategies

Differentiated marketing targets several different market segments and designs separate offers for each

• Also called selective specialization• Goal is to achieve higher sales and stronger

position• More expensive than undifferentiated

marketing

Target Marketing Strategies

Concentrated marketing targets a narrow, specific consumer segment through one, specialized marketing plan catering to the needs of that segment.•Also called niche marketing•Limited company resources• One or limited market segment is served

•Knowledge of the market•More effective and efficient

Concentrated marketing cont…

• Via concentrated marketing, a firm can succeed by appealing to one segment with a tailored marketing plan

• Try to avoid “majority fallacy”– Enter to a smaller, but untapped segment

Majority Fallacy

Target Marketing Strategies

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations

• Local marketing• Individual marketing

Target Marketing Strategies

Micromarketing cont…Local marketing involves tailoring brands and

promotion to the needs and wants of local customer groups

• Cities• Neighborhoods• Stores

Target Marketing Strategies

Micromarketing cont…Individual marketing involves tailoring products and

marketing programs to the needs and preferences of individual customers

• Also known as:– One-to-one marketing– Mass customization– Markets-of-one marketing

Target Marketing Strategies

• Selecting and Executing a StrategySelecting and Executing a Strategy– No single, best choice strategy suits all firms– Depends on:

• Company resources• Product variability• Product life-cycle stage• Market variability• Competitor’s marketing strategies

Socially Responsible Target Marketing

• Benefits customers with specific needs• Concern for vulnerable segments• Children

– Alcohol– Cigarettes– Internet abuses

Contrasting Target Market Approaches

Differentiation and

Positioning

Company should target on value proposition- how it will create differentiated

value for targeted segments and what positions it wants to occupy in those

segment

Positioning

The act of designing the company’s offering and image so that they occupy a

meaningful and distinct competitive position in the target customers’ minds.

Positioning

Product 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

– Perceptions– Impressions– Feelings

Positioning

• Two fundamental elements: – Physical attributes - the functionality and capability that a brand

offers.– Communication - the way in which a brand is communicated and

how consumers perceive the brand relative to other competing brands in the market place.

Positioning

• How customers view the firm and its product– Mercedes, position is luxury– Landrover, position is very very reliable– Porsche and BMW-Performance– Volvo- Safety– Walmart, position is lowest price, quality not

so bad

Porsche is positioned on the basis of performance and freedom.

Positioning

Used a s a communication tool to reach target customers in a crowded marketplace.

Positioning (Getting Into the Mind of the Customer)

• Easiest way of getting into someone’s mind is to be first.– Easy to remember who is first.

• Cut through the noise level of other products

• Customers rank brands in their minds.

• Difficult to replace the market leader in the mind of the customer.

Positioning Maps

Marketer prepare perceptual maps for planning differentiation and positioning strategies.

Differentiation and Positioning

Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions

Example of a Perceptual Map

Differentiation and Positioning Strategy

• Three steps:– Identifying a set of possible competitive

advantages– Choosing the right competitive advantages– Selecting an overall positioning strategy

Choosing a Positioning Strategy

Identifying possible competitive advantages • Many potential sources of differentiation exist:

– Products• Consistency, durability, reliability, reparability

– Services• Speed, convenience, careful delivery

– Channels– People

• Hiring, training better people than competition

– Image• Convey benefits and positioning

Porsche is positioned on the basis of performance and freedom.

Choosing a Positioning Strategy

Choosing the Right Competitive Advantages

• Choosing the right competitive advantage– How many differences to promote?

• Unique selling proposition– Ex: Wal-Mart promotes low price

• More than one differentiator

– Which differences to promote?

Choosing a Positioning Strategy

Which difference to promoteWhich difference to promote

• Important

• Superior

• Preemptive

• Distinctive

• Communicable

• Affordable

• Profitable

Selecting an Overall Positioning Strategy

• Full positioning of a brand is called the brand’s value proposition– Full mix of benefits upon which it is positioned

• Gives answer to the customer’s question “why should I buy your brand?’– Ex: Volvo's proposition hinges on safety but

also includes reliability, styling.

Selecting an Overall Positioning Strategy

Fig: Possible value propositions

Value proposition is the full mix of benefits upon which a brand is positioned

More for More

• This positioning strategy involves providing the most upscale product or service and charging a higher price.

Ex: Ritz-Carlton Hotels, Mont Blanc,

Mercedes automobile.

More for the Same/Less

• Companies can targeted competitor more-for-more strategy with more for the same or more for less.

Ex: Toyota introduced its Lexus line with a “more for the same” value proposition versus Mercedes, and BMW.

Same for Less

• Powerful value proposition.

Ex: Dell offers equivalent quality computers at a lower “price for performance”

Wal-Mart use this strategy.

AMD makes less expensive versions of Intel’s microprocessor chips.

Changing your position

• Changing your position, to get better reaction, might mean

1. Changing the Product (one of the 4 P’s)

2. Changing the Price3. Adding a new product line

4. Change the advertising (Promotion) eg. Women in truck commercials eg. 7UP - the Un-cola

Repositioning Strategies

The following four ways outline how to approach repositioning a product, depending on the individual

situation facing a brand. In some cases, a brand might need to be adapted before relaunch.

1. Change the tangible attributes and then communicate the new proposition to the same market.

2. Change the way a product is communicated to the original market.

3. Change the target market and deliver the same product.

4. Change both the product (attributes) and the target market.

Developing a Positioning Statement

• A statement that summarizes company or brand positioning- it takes this form: To (Target segment and need) our (brand) is (concept) that (point of difference).

• Ex: To busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that allows you to stay connected to data, people, and resources while on the go, easily and reliably.