Principles of Marketing Eighteenth Edition

Chapter 7

Customer Value-Driven Marketing Strategy:

Creating Value for Target Customers

Copyright © 2018 Pearson Education Ltd. All Rights Reserved.

Learning Objectives

7-1 Define the major steps in designing a customer-driven marketing

strategy: market segmentation, targeting, differentiation, and
positioning.
7-2 List and discuss the major bases for segmenting consumer and
business markets.
7-3 Explain how companies identify attractive market segments and choose
a market-targeting strategy.
7-4 Discuss how companies differentiate and position their products for
maximum competitive advantage.
Customer-Driven Marketing Strategy
Market Segmentation

Market requires dividing a market into smaller

Segmentation segments with distinct needs, characteristics,
or behaviors that might require separate
marketing strategies or mixes.
Market Segmentation

Segmenting consumer markets

Segmenting business markets

Segmenting international markets

Requirements for effective segmentation

Market Segmentation I Consumer Markets

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation
Market Segmentation I Consumer Markets

Geographic calls for dividing the market into different

Segmentation geographical units such as:

 World region  City

 Country  Neighborhood
 Country region  Climate
 Province  Population density
Market Segmentation I Consumer Markets

Demographic divides the market into segments based on

Segmentation variables such as age, life-cycle stage,
gender, income, occupation, education,
religion, ethnicity, and generation.

• Most popular basis for segmentation

• Easiest to measure
• Demographics are closely related
to needs, wants and usage rates
Market Segmentation I Consumer Markets
Age and life-cycle divides a market into different
stage Segmentation age and life-cycle groups.

Gender divides a market into

Segmentation different segments
based on gender.

Income divides a market into

Segmentation different income
segments.
Market Segmentation I Consumer Markets

What type of
demographic
segmentation
is reflected in this
Kmart Discount
Stores ad?
Market Segmentation I Consumer Markets

Psychographic divides a market into different segments

Segmentation based on social class, lifestyle, or personality
characteristics.

VS
Market Segmentation I Consumer Markets

Behavioral divides a market into segments based on consumer

knowledge, attitudes, uses of a product, or responses
Segmentation
to a product.

• Occasions
• Benefits sought
• User status (non, ex, potential, first-
time or regular users)
• Usage rate
• Loyalty status (light, medium or heavy
users)
Market Segmentation I Consumer Markets

Multiple is used to identify smaller, better-defined

Segmentation target groups.
Market Segmentation I Business Markets

Consumer and business marketers use many of the same

variables to segment their markets.

Additional variables include:

• Customer operating characteristics
• Purchasing approaches
• Situational factors
• Personal characteristics
Market Segmentation I International Markets

Geographic Economic
location factors

Political and Cultural

legal factors factors
Market Segmentation I International Markets

Intermarket involves forming segments of consumers who have

similar needs and buying behaviors even though they
Segmentation
are located in different countries. (also called cross-
market segmentation)

Global Middle-Class Global Middle & Upper Class,

Teenagers & Young Adults
Requirements for Effective Segmentation

Measurable Accessible Substantial

Differentiable Actionable
Customer-Driven Marketing Strategy
Market Targeting I Evaluating Market Segments

Segment size and growth

Segment structural attractiveness

• Level of competition
• Available substitute products
• Power of buyers
• Power of supplier
Company objectives and resources
Market Targeting

By going after segments instead of the whole

market, companies have a much better chance to
deliver value to consumers - and to receive
maximum rewards for paying close attention to
customer needs

is a set of buyers who share

Target Market common needs or
characteristics that the
company decides to serve (a
“rifle” approach)
Market Targeting

Figure 7.2 Market-Targeting Strategies.

Market Targeting I Selecting Target Market Segments

Undifferentiated targets the whole market with one offer.

marketing • Mass marketing
• Focuses on common needs rather than what’s
different

This strategy makes it difficult to compete with more-focused companies

that do a better job of satisfying the needs of specific segments and
niches.
Market Targeting I Selecting Target Market Segments

Differentiated targets several different market segments and designs

marketing separate offers for each. (Segmented Marketing)

• Goal is to achieve higher sales and

stronger position
• More expensive than undifferentiated
marketing
Market Targeting I Selecting Target Market Segments

Concentrated targets a large share of one or a few smaller

(niche) marketing segments or niches

• Lets smaller companies focus limited

resources
• Achieve a strong position & reputation in the
segment because of greater knowledge of
segment’s needs
• Achieve operating economies from
specialization
• However, higher risk is involved – you have
“all your eggs in one basket”
Market Targeting I Selecting Target Market Segments

connect the world's

Bringing the world closer professionals to make them more
together productive and successful
Market Targeting I Selecting Target Market Segments

is the practice of tailoring products and marketing

Micromarketing
programs to suit the tastes of locations and specific
individuals

• Local marketing and Individual

marketing
• Drawbacks: Higher costs & no
economies of scale
• Benefits: Very close attention to
individual customer needs
Market Targeting I Selecting Target Market Segments

involves tailoring brands and promotion to the needs

Local marketing
and wants of local customer segments.
• Cities
• Neighborhoods
• Stores

tailoring promotion
tailoring brands
Market Targeting I Selecting Target Market Segments

Individual involves tailoring products and marketing programs to

marketing the needs and preferences of individual customers.
Also known as:
• One-to-one marketing
• Mass customization

The Rolls-Royce Bespoke design team works closely with

individual customers to help them create their own unique
Rolls-Royces.
Market Targeting I Selecting Target Market Segments

Choosing a targeting strategy depends on

Company resources

Product variability

Product life-cycle stage

Market variability

Competitor’s marketing strategies

Market Targeting I Socially Responsible Target Marketing

Targeting benefits customers with specific needs

but there is concern for vulnerable segments

• Children: Alcohol, Cigarettes & Internet

abuses
• Minorities & the poor
• The issue is not who is targeted but rather
how and for what (Colgate targeting kids for
toothbrushes is OK)
Customer-Driven Marketing Strategy
Differentiation and Positioning

Value Proposition How a company will create differentiated value for

targeted segments and what positions it wants to
occupy in those segments.

Product positioning is the way the product is defined by consumers on

important attributes - the place the product occupies in
consumers’ minds relative to competing products (clear,
distinctive & desirable)
Differentiation and Positioning

Positioned on Positioned on
Positioned on
luxury performance safety

Positioning: Sonos does more than just sell

speakers; it unleashes “All the music on earth,
in every room of your house, wirelessly.”
Differentiation and Positioning
Perceptual show consumer perceptions of marketer’s brands
Positioning maps versus competing products on important buying
dimensions.

Luxury Sport
Utility Vehicles
Differentiation and Positioning

Choosing a Differentiation and Positioning Strategy

Step 1 Identifying a set of possible competitive advantages to build

a position

Step 2 Choosing the right competitive advantages

Step 3 Selecting an overall positioning strategy

Step 4 Communicating and delivering the chosen position to the

market
Differentiation and Positioning

Step 1 Identifying a set of possible competitive advantages to

build a position

Competitive is an advantage over competitors gained by offering

advantage consumers greater value, either through lower prices
or by providing more benefits that justify higher
Product differentiation prices.

Service differentiation
Channel differentiation
People differentiation
Image differentiation
Differentiation and Positioning

Panasonic’s
Toughbook Laptop is
positioned as the
durable & reliable
laptop that works even
in the toughest
environments
Differentiation and Positioning

Samsung smart phone differentiates Carrefour differentiates and positions

and positions its smart phone on its its supermarket on Price
camera and quality of photos (Product)
Differentiation and Positioning

Step 2 Choosing a Differentiation and Positioning Strategy

A competitive Important Distinctive Superior

advantage should be:

Communicable Preemptive Affordable

Profitable
Differentiation and Positioning

Step 3 Selecting an overall positioning strategy

Value Proposition

is the full mix of benefits upon which

a brand is positioned.
It is the answer to the customer’s
question “Why should I buy your
brand?”
Differentiation and Positioning

Which overall positioning strategy is

being used here?
Differentiation and Positioning

Positioning summarizes company or brand positioning using this

statement form: To (target segment and need) our (brand) is
(concept) that (point of difference)

Positioning Statement Example for Evernote:

To busy multitaskers who need help remembering things, Evernote is a digital
content management application that makes it easy to capture and remember
moments and ideas from your everyday life using your computer, phone, tablet,
and the Web.

Positioning Statement Example for Amazon:

To consumers who want to purchase a wide range of products online with quick
delivery, Amazon is an online retailer that provides a one-stop online shopping
site.
Differentiation and Positioning

Step 4 Communicating and Delivering the Chosen Position

The entire marketing mix must support the chosen positioning strategy. May
require changes to the product, pricing, distribution or promotion
Establishing a position or changing one usually takes a long time
Maintaining a position requires consistent performance and communication