Chapter 7

Customer Value-Driven Marketing Strategy:

Creating Value for Target Customers

Principles of Marketing
Philip Kotler, Gary Armstrong
 Analyzing the Marketing Environment
Topic Outline

• Customer-Driven Marketing Strategy

• Market Segmentation
• Market Targeting
• Differentiation
• Positioning

Customer Value-Driven Marketing Strategy 2

Four Major Steps of Customer Value-Driven
Marketing Strategy

1 3

2 4

Customer Value-Driven Marketing Strategy 3

 Market Segmentation
Dividing the entire market into distinct group of buyers
who have different needs, characteristics, or behaviors
and who might require separate marketing strategies or
mixes.
Gone are the days of mass marketing!

Customer Value-Driven Marketing Strategy 4

 Variables Used in Segmenting Consumer
Markets

à Geographic
à Demographic
à Psychographic
à Behavioral

Customer Value-Driven Marketing Strategy 5

 Geographic Segmentation

à Variables for geographic segmentation:

à Geographic units: nations, regions, states,
counties, cities or even neighborhoods
à Density
à Climate

Customer Value-Driven Marketing Strategy 6

 Demographic Segmentation

à Variables: age, life-cycle, gender, income, occupation,

education, religion, ethnicity and generation

à Most popular bases for segmentation because:

1. Customer needs, wants, and usage rates often
vary closely with demographic variables
2. Easier to measure

Customer Value-Driven Marketing Strategy 7

 Psychographic Segmentation

à Remember chapter 5???

à Dividing into segments based of lifestyle or

personality characteristics

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 Requirements for Effective
Segmentation
à Measurable: size, purchasing power, and profiles of the
segments can be measured.
à Accessible: segments can be effectively reached and
served.
à Substantial: segments large or profitable enough to
serve.

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 Requirements for Effective
Segmentation
à Differentiable: segments are conceptually distinguishable
and respond differently to different marketing mix elements
and programs.
à Actionable: effective marketing programs can be
designed for attracting and serving the segments.

Customer Value-Driven Marketing Strategy 10

 Market Targeting

à Evaluating each market segment’s attractiveness

and selecting one or more segments to serve

Customer Value-Driven Marketing Strategy 11

 Market Targeting

à Evaluating Market Segments: firm must look at the three

factors -

Size and Structural

Growth Attractiveness

Company
Objectives and
Resources

Customer Value-Driven Marketing Strategy 12

 Market Targeting

à Evaluating Market Segments:

§ Segment size and growth: right size and growth.

§ Segment structural attractiveness: strong

competitors, substitute products, power of
buyers, powerful suppliers

§ Company objectives and resources: make sense

for long run objectives and have required
resources.
Customer Value-Driven Marketing Strategy 13
 Market Targeting

à Selecting Target Market Segments:

à Target Market - a set of buyers who share common needs
or characteristics that a company decides to serve
à For selection company needs to apply Market Targeting
Strategies

Customer Value-Driven Marketing Strategy 14

 Market Targeting
à Selecting Target Market Segments:
à Market Targeting Strategies:
§ Target broadly (undifferentiated / mass marketing):
ignore market segments, go after the whole market
with one offer.
§ Coca-cola, keep low cost

§ Differentiated marketing: target several market

segments and designs separate offers for each.
§ GM (cars for every “purse, purpose, personality”),
Increase cost

Customer Value-Driven Marketing Strategy 15

 Market Targeting
à Market Targeting Strategies (Contd.):
§ Concentrated (niche) marketing: large share of one or a
few segments or niches, ignored by larger competitors.
limited resources, gain operating economies through
specialization.
§ Zappos – only shoes and only online

Customer Value-Driven Marketing Strategy 16

 Market Targeting
à Market Targeting Strategies (Contd.):
§ Micromarketing: tailor products and marketing
programs to the needs and wants of specific individuals
and local customer groups.
§ Local Marketing: local customer groups – cities,
neighborhoods, Retailers.
§ Customize each store’s merchandise and
promotions.
§ Individual Marketing: individual customers.
§ Dell computer.

Customer Value-Driven Marketing Strategy 17

 Choosing a Market Targeting Strategy
à Many factors need to be considered before choosing any
of the strategies mentioned till now:

Competitors’ Company
Strategies Resources
Factors
Affecting
Market Strategy Product
Variability Decisions Variability

Stage in
Life Cycle
Customer Value-Driven Marketing Strategy 18
 Differentiation
à Differentiating the market offering to create
superior customer value

Make a distinction/set
apart

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 Positioning
à Arranging for a market offering to occupy a clear,
distinctive, and desirable place relative to (you can
say “in comparison with”) competing products in the
minds of the target consumers.

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Steps of Differentiation and Positioning Task
1. Identifying Possible Value Differences and Competitive
Advantages
2. Choosing the Right Competitive Advantages
3. Selecting an Overall Positioning Strategy

Customer Value-Driven Marketing Strategy 21

 Identifying Possible Value Differences and
Competitive Advantages

à Competitive Advantage: An advantage over competitors

gained by offering greater customer value either by having
lower prices or by providing more benefits that justify higher
prices.

Customer Value-Driven Marketing Strategy 22

 Choosing the Right Competitive Advantage

§ How many differences to promote

§ Which differences to promote: important, distinctive,

superior, communicable, preemptive, affordable,
profitable

Customer Value-Driven Marketing Strategy 23

Selecting an Overall Positioning Strategy

à Value Proposition: Full positioning of a brand -

full mix of benefits on which it is positioned

Customer Value-Driven Marketing Strategy 24

Selecting an Overall Positioning Strategy

Customer Value-Driven Marketing Strategy 25