1. Chapter Seven Customer-Driven Marketing Strategy:
Creating Value for Target Customers

2. Customer-Driven Marketing Strategy: Creating Value for Target Customers
This chapter looks into key customer-driven marketing strategy 4 steps:
1- dividing up markets into meaningful customer groups (segmentation),
2- choosing which customer groups to serve (targeting),
3- creating market offerings that best serve targeted customers (differentiation), and
4- positioning the offerings in the minds of consumers (positioning).

3. Differentiation and Positioning
Customer-Driven Marketing Strategy: Creating Value for Target Customers
Topic Outline
Customer-Driven Marketing Strategy major steps to create value for customers:
Market Segmentation
Market Targeting
Differentiation and Positioning

4. Customer-Driven Marketing Strategy: Creating Value for Target Customers
In concept, marketing boils down to
two questions: (1) Which customers
will we serve? and (2) How will we
serve them? Of course, the tough
part is coming up with good answers
to these simple-sounding yet difficult
questions. The goal is to create more
value for the customers we serve
than competitors do

5. Market Segmentation

6. Market Segmentation
Market segmentation Dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes.

7. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Geographic segmentation
Demographic segmentation
Psychographic segmentation
Behavioral segmentation

8. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities.
Example: Walmart services Hispanic places in U.S.A with relevant product assortment.

9. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality

10. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
- 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, middle-income or low-income consumers.
Note to Instructor
This link goes to gurl.com, a Web site for female teenagers and young adults. It is interesting to browse with the students to note what kind of content is of interest to this group. A look at the advertisers with banner ads, sponsorships, or contests on the site shows the importance of targeted locations to these advertisers.

11. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits
Note to Instructor
There are a whole group of products which are targeted to the affluent including hotels like Four Seasons, which is mentioned in the book. Their products offerings are deluxe:
Kids in the City package for $520 a night and, among other things, enjoy a visit in their room from the Ice Cream Man, who arrives with all the fixings to make any concoction they desire.
The Benjamin Hotel in New York City provides dog beds in a variety of styles and doggie bathrobes, as well as canine room service and DVDs for dogs.
At the Ritz-Carlton, Lake Las Vegas in Henderson, Nevada, the Love at Lake Las Vegas weekend package includes two nights in the 2,400 square foot presidential suite, helicopter and gondola rides, a champagne-tasting party on a yacht complete with rose petals strewn about and a string trio, use of a luxury car throughout the stay, in-room couples spa treatment, a $5,000 casino line of credit, a $50,000 shopping spree at Neiman Marcus, 14 dozen roses, and a butler-drawn Cristal champagne bath.

12. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product
Occasions
Benefits sought
User status
Usage rate
Loyalty status
Note to Instructor
Occasion segmentation
Dividing the market into segments
according to occasions when buyers get
the idea to buy, actually make their
purchase, or use the purchased item.
Benefit segmentation
according to the different benefits that
consumers seek from the product.
Students often get confused with the difference between behavioral and psychographic segmentation. Behavior is more tied into how consumers use the product. A good illustration is greeting cards—ask students how their purchasing would be different when buying a birthday card for their mother versus one for a new boyfriend. In addition, ask them how people might look for different benefits when purchasing a car? Some might look for safety while others will look for the best gas mileage.

13. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Occasions (Some holidays, such as Mother’s Day and Father’s Day, were originally promoted partly to increase the sale of candy, flowers, cards, and other gifts).
Benefits sought (benefits people look for in the product)
User status (nonusers, ex-users, potential users, first-time users, and regular users of a product)
Usage rate (light, medium, and heavy product users).
Loyalty status (Consumers can be loyal to brands (Tide), stores (Target), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty).
Note to Instructor
Occasion segmentation
Dividing the market into segments
according to occasions when buyers get
the idea to buy, actually make their
purchase, or use the purchased item.
Benefit segmentation
according to the different benefits that
consumers seek from the product.
Students often get confused with the difference between behavioral and psychographic segmentation. Behavior is more tied into how consumers use the product. A good illustration is greeting cards—ask students how their purchasing would be different when buying a birthday card for their mother versus one for a new boyfriend. In addition, ask them how people might look for different benefits when purchasing a car? Some might look for safety while others will look for the best gas mileage.

14. Characteristics of Snack Food Market Segments

15. Segmenting The Snack Food Market
Market Segmentation
Segmenting The Snack Food Market

16. Segmenting International markets
Market Segmentation
Segmenting International markets
Geographic location
Economic factors
Political-legal factors
Cultural factors

17. Segmenting International Markets
Market Segmentation
Segmenting International Markets
Intermarket segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries
Large companies, such as Coca-Cola or Sony, sell products in more than 200 countries.

18. Requirements for Effective Segmentation
Market Segmentation
Requirements for Effective Segmentation
To be useful, market segments must be:
Measurable
Accessible
Substantial
Differentiable
Actionable
Measurable: The size, purchasing power, and profiles of the segments
can be measured.
Accessible: The market segments can be effectively reached and
served.
Substantial: The market segments are large or profitable enough to
serve.
Differentiable: The segments are conceptually distinguishable and
respond differently to different marketing mix elements and programs.
If men and women respond similarly to marketing efforts for soft drinks, they
do not constitute separate segments.
Actionable: Effective programs can be designed for attracting and serving the segments.

19. Requirements for Effective Segmentation
Market Segmentation
Requirements for Effective Segmentation
1- Measurable: The size, purchasing power, and profiles of the segments can be measured.
2- Accessible: The market segments can be effectively reached and served.
3- Substantial: The market segments are large or profitable enough to serve.
4- Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.
5- Actionable: Effective programs can be designed for attracting and serving the segments.

20. Evaluating Market Segments
Market Targeting
Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors:
Segment size and growth: current segment sales, growth rates, and the expected profitability for various segments.
Segment structural attractiveness: includes factors that affect long-run attractiveness. These factors might include strong and aggressive competitors, substitute products, and high power of buyers or powerful suppliers.
Company objectives and resources: large markets may not be relevant to some companies.
Note to Instructor
Structural attractiveness includes factors that affect long-run attractiveness. These factors might include strong and aggressive competitors, substitute products, and high power of buyers or powerful suppliers.

21. Selecting Target Market Segments
Market Targeting
Selecting Target Market Segments

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

23. Target Marketing Strategies
Market Targeting
Target Marketing Strategies
Undifferentiated marketing targets the whole market with one offer
Mass marketing
Focuses on common needs rather than what’s different
The company designs a product and a marketing program that will appeal to the largest number of buyers.
Example: Coca Cola

24. Target Marketing Strategies
Market Targeting
Target Marketing Strategies
Differentiated (Segmented) marketing targets several different market segments and designs separate offers for each
- Example: Toyota Corporation produces several different brands of cars—from Scion to Toyota to Lexus—each targeting its own segments of car buyers.
- Goal is to achieve higher sales and stronger position
- More expensive than undifferentiated marketing

25. Target Market Strategies
Market Targeting
Target Market Strategies
Concentrated (niche) marketing targets large share of one or a few segments or niches.
- Example: Whole Foods thrives by catering to affluent customers who Walmart can’t serve well
- Limited company resources
- Greater knowledge of the market needs
- More effective and efficient (satisfying market need with low cost)

26. Target Market Strategies
Marketing Targeting
Target Market Strategies
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.
- Micromarketing includes:
Local marketing
Individual marketing
Note to Instructor
In slideshow view, click on movie icon to launch Meredith video snippet. See accompanying DVD for full video segment.

27. Target Market Strategies
Market Targeting
Target Market Strategies
Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups
- Cities
- Neighborhoods
- Stores
- example, Walmart customizes its merchandise store by store to meet the needs of local shoppers.
Note to Instructor
Advances in communications technology have given rise to a new high-tech
version of location-based marketing. By coupling mobile phone services with GPS devices, many marketers are now targeting customers wherever they are with what they want. This might include marketers reaching people near their stores, looking to make a decision.
Discussion Question
What are the drawbacks of local marketing?
It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different regional and local markets. Further, a brand’s overall image might be diluted if the product and message vary too much in different localities.

28. Target Market Strategies
Market Targeting
Target Market Strategies
Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers
- Example: Dell, HP, and Apple create custom-configured computers.
- Also known as:
One-to-one marketing
Mass customization
Markets-of-one marketing
Note to Instructor
Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs.
Has made relationships with customers important in the new economy.
Provides a way to distinguish the company against competitors.

29. Choosing a target strategy depends on:
Company resources: When the firm’s resources are limited, concentrated marketing makes the most sense.
Product variability: Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration.
Product life-cycle stage: When a firm introduces a new product, it may be practical to launch one version only, and undifferentiated marketing or concentrated marketing may make the most sense. In the mature stage of the product life cycle (PLC), however, differentiated marketing often makes more sense.
Market variability: If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.
Competitor’s marketing strategies: When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of buyers in specific segments.

30. Differentiation and Positioning
Products are made in factories, but brands happen in the minds of consumers.

31. Differentiation and 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.
It is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products.
Example: Tide is positioned as a powerful, all-purpose family detergent; Ivory is positioned as the gentle detergent for fine washables and baby clothes, and Toyota positions its fuel efficient.
Note to Instructor
Tide is positioned as a powerful, all-purpose family detergent; Ivory is positioned as the gentle detergent for fine washables and baby clothes.
At Subway restaurants, you “Eat Fresh;” at Olive Garden, “When You’re Here, You’re Family;” and at Applebee’s you’re “Eatin’ Good in the Neighborhood.”
In the automobile market, the Nissan Versa and Honda Fit are positioned on economy, Mercedes and Cadillac on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety. And Toyota positions its fuel efficient, hybrid Prius as a high-tech solution to the energy shortage. “How far will you go to save the planet?” it asks.

32. Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Identifying a set of possible competitive advantages to build a position.
Choosing the right competitive advantages.
Selecting an overall positioning strategy (value proposition).
Communicating and delivering the chosen position to the market.

33. Differentiation and Positioning
Identifying Possible Value Differences and Competitive Advantages
Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices

34. Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Identifying a set of possible competitive advantages to build a position by providing superior value from:
Product differentiation
Service differentiation
Channel differentiation
People differentiation
Image differentiation

35. Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy
Product differentiation, brands can be differentiated on features, performance, or style and design.
Services differentiation through speedy, convenient, or careful delivery.
Channel differentiation gain competitive advantage through the way
they design their channel’s coverage, expertise, and performance. Amazon.com and GEICO set themselves apart with their smooth-functioning direct channels.
People differentiation—hiring and training better people than their competitors do. Disney World people are known to be friendly and upbeat.
Image differentiation. A company or brand image should convey a product’s
distinctive benefits and positioning (such as quality).

36. Differentiation and Positioning
Choosing the Right Competitive Advantage
Differences to promote should be:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
Important: The difference delivers a highly valued benefit to target
buyers.
• Distinctive: Competitors do not offer the difference, or the company
can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers
might obtain the same benefit.
• Communicable: The difference is communicable and visible to
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.

37. Differentiation and Positioning
Choosing the Right Competitive Advantage
Differences to promote should be:
Important: The difference delivers a highly valued benefit to target
Buyers (usable benefits).
• Distinctive: Competitors do not offer the difference, or the company
can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers
might obtain the same benefit.
• Communicable: The difference is communicable and visible to
buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
Important: The difference delivers a highly valued benefit to target
buyers.
• Distinctive: Competitors do not offer the difference, or the company
can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers
might obtain the same benefit.
• Communicable: The difference is communicable and visible to
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.

38. Differentiation and Positioning
Selecting an Overall Positioning Strategy
(value proposition)
Value proposition is the full mix of benefits upon which a brand is positioned
The five green cells represent winning value propositions—
differentiation and positioning that gives the company competitive advantage.
Figure shows possible value propositions on which a company might position
its products. In the figure, the five green cells represent winning value propositions—
differentiation and positioning that gives the company competitive advantage. The red
cells, however, represent losing value propositions. The center yellow cell represents at
best a marginal proposition. In the following sections, we discuss the five winning value
propositions on which companies can position their products: more for more, more for
the same, the same for less, less for much less, and more for less.

39. Selecting an Overall Positioning Strategy (value proposition)
More-for-more positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs. Example: Four Seasons hotels, Rolex watches, Mercedes automobiles—each claims superior quality, craftsmanship, durability, performance, or style and charges a price to match.
More for the Same. Companies can attack a competitor’s more-for-more positioning by introducing a brand offering comparable quality at a lower price. Example, Toyota introduced its Lexus line with a “more-for-the-same” value proposition versus Mercedes and BMW.
The Same for Less. Offering “the same for less” can be a powerful value proposition— everyone likes a good deal. Example: Discount stores such as Walmart and DSW Shoes use this positioning. They don’t claim to offer different or better products, but give discounts based on superior purchasing power and lower-cost operations.
Less for Much Less. A market almost always exists for products that offer less and therefore cost less. Few people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less than optimal performance for a lower price.
More for Less. Of course, the winning value proposition would be to offer “more for less. Example: Depot had arguably the best product selection, the best service, and the lowest prices compared to local hardware stores and other home improvement chains.