Principles of Marketing Chapter 6: Creating Value for Target Customers

Designing a Customer-Driven Marketing Strategy Designing a true customer-driven marketing strategy involves: Segmentation Targeting Differentiation Positioning Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Market Segmentation Segmentation: The process of dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs. Key variables: Geographic Demographic Psychographic Behavioral Dr. James Carver – Auburn University

Market Segmentation (cont.) Geographic: Nations Region of country States Counties Cities Neighborhoods Dr. James Carver – Auburn University

Market Segmentation (cont.) 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. Dr. James Carver – Auburn University

Market Segmentation (cont.) Age and life-cycle stage Addresses the fact that consumer needs and wants change with age. Avoid stereotypes in promotions based on age. e.g., Boomers don’t act like those of previous generations Promote positive messages & avoid “talking down” when marketing to mature consumers. Dr. James Carver – Auburn University

Market Segmentation (cont.) 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 (Walmart vs. Target) Troubled economy makes marketing to all income groups a challenge. Dr. James Carver – Auburn University

Market Segmentation (cont.) Psychographic segmentation: Dividing a market into different groups based on social class, lifestyle, or personality characteristics. Behavioral segmentation: Dividing buyers into groups based on consumer knowledge, attitudes, uses, or responses to a product. Dr. James Carver – Auburn University

Behavioral Segmentation Occasion segmentation: Special promotions and labels for holidays. Special products for special occasions. Benefits sought: Different segments desire different benefits from products. User status: Nonusers, ex-users, potential users, first-time users, regular users. Dr. James Carver – Auburn University

Market Segmentation (cont.) Use of multiple segmentation bases provides: Ability 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. Dr. James Carver – Auburn University

Dr. James Carver – Auburn University PRIZM NE PRIZM NE: Multivariable segmentation systems developed by Claritas, Inc. Potential Rating Index for Markets (PRIZM NE) Based on U.S. census data. Classifies U.S. households into 66 clusters or segments within 14 different social groups. http://www.srds.com/frontMatter/ips/lifestyle/reports/prizm.html Dr. James Carver – Auburn University

Requirements for Effective Segmentation To be useful, market segments must be: Measurable Accessible Substantial Differentiable Actionable Dr. James Carver – Auburn University

Dr. James Carver – Auburn University Market Targeting Market targeting involves: Evaluating marketing segments. Selecting target market segments. Being socially responsible. Dr. James Carver – Auburn University

Selecting Target Market Segments Targeting strategies include: Undifferentiated (mass) marketing: Ignores segmentation opportunities. Differentiated (segmented) marketing: Target several segments & make separate offers to each Concentrated (niche) marketing: Targets one or a couple small segments. Micromarketing (local or individual marketing) Dr. James Carver – Auburn University

Dr. James Carver – Auburn University 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. Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University

Differentiation and Positioning Choosing a differentiation and positioning strategy involves: Identifying a set of differentiating competitive advantages on which to build a position. Choosing the right competitive advantages. Selecting an overall positioning strategy. Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University

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 examining the entire customer experience Dr. James Carver – Auburn University

Differentiation and Positioning Types of differentiation: Product differentiation Services differentiation Channels differentiation People differentiation Image differentiation Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University

Differentiation and Positioning Worthwhile differences that could be promoted are: Important Distinctive Superior Communicable Preemptive Affordable Profitable Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University

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.” Dr. James Carver – Auburn University

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. Dr. James Carver – Auburn University