Customer Value-Driven Marketing Strategy

Lesson Objectives:
1. Define the major steps in designing a customer value–driven
marketing strategy: market segmentation, targeting, differentiation,
and positioning.
2. Discuss the major bases for segmenting consumers
3. Explain how companies identify attractive market segments and
choose a market-targeting strategy.
4. Discuss how companies differentiate and position their products for
maximum competitive advantage.
Companies today recognize that they cannot appeal to all buyers in the
marketplace. Buyers are too numerous, widely scattered, and varied in
their needs and buying practices. Moreover, companies themselves vary
widely in their abilities to serve different market segments. Companies
must identify the parts of the market they can serve best and most
profitably. They must design customer-driven marketing strategies that
build the right relationships with the right customers. Thus, most
companies have moved away from mass marketing and toward target
marketing: identifying market segments, selecting one or more of them,
and developing products and marketing programs tailored to each.
The figure shows the four major steps in designing a customer value–driven marketing
strategy. In the first two steps, the company selects the customers that it will serve. In
the final two steps, the company decides on a value proposition—how it will create
value for target customers.
• Buyers in any market differ in their wants, resources, locations, buying
attitudes, and buying practices. Through market segmentation,
companies divide large, diverse markets into smaller segments that
can be reached more efficiently and effectively with products and
services that match their unique needs.

• In this section, we discuss segmenting consumer markets.

*Many companies today are localizing their products, services, advertising, promotion, and sales
efforts to fit the needs of individual regions, cities, and other localities.
B. Demographical Segmentation

• Demographic factors are the most popular bases for segmenting customer
groups.
 C. Psychographic Segmentation
• Divides buyers into different segments based on lifestyle or personality
characteristics. People in the same demographic group can have very
different psychographic characteristics.

Lifestyle – the way in which a person or group lives

Personality- the combination of characteristics or qualities that form an individual's distinctive character.
 D. Behavioral Segmentation
• Behavioral segmentation divides buyers into segments based on their knowledge,
attitudes, uses, or responses to a product, past actions, like spending habits,
browsing habits, and brand engagements.
• Many marketers believe that behavior variables are the best starting point for
building market segments. (91% of marketers believe it’s the most effective)
a. Occasions. Buyers can be grouped according to occasions when they get the idea to buy, actually make their
purchases, or use the purchased items.
b. Benefit segmentation requires finding the major benefits people look for in a product class.
For example, people who buy wearable health and activity trackers are looking for a variety of benefits, everything from counting steps taken and calories burned
to heart rate monitoring and high-performance workout tracking and reporting.

c. Loyalty Status. A market can also be segmented by consumer loyalty.

Consumers can be loyal to brands (Tide), stores (711), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty. Some consumers
are completely loyal—they buy one brand all the time. For example, whether they own a MacBook Pro, an iPhone, or an iPad)

d. User Status. Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users
of a product.
Examples: new parents, new couples
 Athleta sells an urban-
Secret deodorant specially active lifestyle to
formulated for a woman’s women with its yoga,
chemistry, packaged and running, and other
advertised to reinforce athletic clothing along
the female image. with urban-causal,
DEMOGRAPHIC post-workout apparel.
PSYCHOGRAPHIC (Lifestyl
Emirates that
offers economy
class, business
class, and first
Lazada Payday Sale on May 15-17 class to different
passengers
BEHAVIORAL – Occasion
DEMOGRAPHIC

House and lot for

newly wed couples
BEHAVIORAL
Hermes Berkin bag that is limited (Usage Status)
edition and costs 1,000,000php
PSYCHOGRAPHIC (Status Symbol)
After dividing the market into segments, it’s
time to answer that first simple marketing
strategy question:

Which customers will the company serve?

• After evaluating different segments, the company
must decide which and how many segments it will
target. A target market consists of a set of buyers
who share common needs or characteristics that a
company decides to serve.

There are three different target market strategies you can

implement – differentiated marketing, concentrated
marketing, and undifferentiated marketing. Learn the
differences and select the right strategy for your business.
A. Differentiated Marketing
• Using a differentiated marketing (or segmented marketing) strategy, a
firm decides to target several market segments and designs separate
offers for each.
• It occurs when a company creates campaigns that appeal to two or
more different target audiences, demographics, or marketing
segments.
• Say a resto bar has been in business for six months, and
things are going great. The owner has identified the shop’s
ideal customer base as young professionals, ages 25–35,
with lower- to middle-class income. Now that the shop is
generating steady revenue, the owner decides to expand
its reach into new market segments as a way to fill the
slower sales hours in the afternoon.
• The bar decides to run a “HAPPY HOUR” special for the
following month and segment its campaign by budget-
conscious and quality-focused prospects. It sends a
promotion to college students, offering a quick and
affordable drink and experience, as well as a short video to
older, higher-income prospects, showcasing the shop’s
high-quality beers and events.
B. Concentrated Marketing
• When using a concentrated marketing (or niche marketing) strategy,
instead of going after a small share of a large market, a firm goes after
a large share of one or a few smaller segments or niches.
• Concentrated marketing occurs when a company creates a single
marketing message for a specific, narrow demographic.

A niche market is the subset of the market on which a specific

product is focused.
This marketing strategy typically works best for startups, and is a
natural step for any business looking to find their ideal prospect or
niche. Take our previous resto bar example. Say the bar was newly
opened and identified its target audience as 25–35 years old, lower- to
middle-class income, young professionals.
C. Undifferentiated Marketing
• Undifferentiated marketing (or mass marketing) strategy, occurs when a
company creates one campaign for its entire audience, with all segments
seeing the same message.
• This usually means the message is more general in order for it to appeal to
such a wide range of people. The company designs a product and a marketing
program that will appeal to the largest number of buyers.
• It is very common across TV ads, radio ads, print news ads, car ads, and
billboards. At its core, undifferentiated marketing strategies are about casting a
wide net — they aren’t concerned with targeting a specific audience or their
needs.
D. Micromarketing
• Micromarketing is the practice of tailoring products and marketing
programs to suit the tastes of specific individuals and local customer
segments. It includes local marketing and individual marketing.
a. Local marketing
Tailoring brands and marketing to the needs and wants of local
customer segments—cities, neighborhoods, and even specific stores.

b. Individual Marketing
Tailoring products and marketing programs to the needs and
preferences of individual customers. It is also labeled one-to-one
marketing, mass customization, and markets-of-one marketing.
 Choosing a Targeting Strategy
Companies need to consider many factors when choosing a market-
targeting strategy:

1. company’s resources - When the firm’s resources are limited, concentrated

marketing makes the most sense.
2. degree of product variability – uniform or standard products are best for
undifferentiated marketing, Products that can vary in design, such as cameras and
cars, are more suited to differentiation or concentration.
3. Product life cycle stage - When a firm introduces a new product, it may be practical
to launch one version only
4. Market variability- refers to shifts and changes in the market. For instance, the
housing market is variable because home prices go up and down on a regular basis.
5. competitor’s marketing strategy- A competitive analysis is a strategy where you
identify major competitors and research their products, sales, and marketing
strategies.
 Differentiated/
Segmented
Undifferentiated/
Mass Marketing

Concentrated/Niche

Micromarketing- localization

Micromarketing- individual marketing

Undifferentiated/
Mass Marketing

Differentiated/
Segmented
 How will we serve our customers?

After deciding which segments of the market it will target, the company
must decide on a value proposition—how it will create differentiated
value for targeted segments and what positions it wants to occupy in
those segments.
Product positioning – It is the way a product is defined by consumers
on important attributes—the place the product occupies in consumers’
minds relative to competing products. Products are made in factories,
but brands happen in the minds of consumers.

You can position a product using a positioning statement that

answers the important questions:

• For whom is the product designed?

• What kind of product is it?
• What is the single most important benefit it offers?
• What is its most important competitor?
• How is it different from that competitor?
• What is the customer benefit of that difference?
Strategy is focus. The best positioning plays to your company’s
strengths and the product’s strengths, and away from weaknesses.
Position your product to reach the buyers whose profiles most closely
match needs you serve, in the channels you can reach, and at the prices
you set.
• To build profitable relationships with target customers, marketers
must understand customer needs and deliver more customer value
better than competitors do.
• When a company can differentiate and position itself as providing
superior customer value, it gains competitive advantage.

What is Competitive Advantage?

An advantage over competitors gained
by offering greater customer value either
by having lower prices or providing more
benefits that justify higher prices.
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Thank You!