Customer-Driven Marketing Strategy (Chapter 7)

Lecture #7
Lecturer: Donna-Kay Smith
Date: June 14, 2016
 Customer-Driven Marketing Strategy
 What it is?
 Major Steps

 Market Segmentation

 Market Targeting

 Differentiation & Positioning

 Companies today have moved away from
mass marketing.

 Marketers know they cannot appeal to all

buyers in their markets, or at least not to all
buyers in the same way.

 Customer-driven marketing – Designing

strategies that build the right relationships
with the right customers.
  Major steps in designing a customer-driven
marketing strategy:
Select Customers to Serve Decide on a Value Proposition
Expected
Outcome

(1) (2) Create Value for

(3) (4)
Market Market Targeted
Differentiation Positioning Customers
Segmentation Targeting
 Market Segmentation – Dividing the total
market into smaller segments of buyers with
distinct needs, characteristics, or behaviours
that might require separate marketing strategies
or mixes.
 Marketers address the question:
“What customers will we serve?”
 Segmentation is important because buyers
differ in wants, resources, location, buying
attitudes and buying practices.
 Marketers must take into consideration the
dynamics affecting segmentation of:
 Consumer Markets
 Business Markets
 International Markets
 Major segmentation variables for Consumer
Markets:

Geographic Demographic

Psychographic Behavioural
 Geographic segmentation – Dividing the
market into different geographical units.

 Examples:
• Nations • Neighborhoods
• States • Population density (urban,
• Region suburban, rural)
• Counties • Climate
• Cities
 Demographic segmentation – Dividing the
marketing into segments based on variables
such as:
• Age • Education
• Life-cycle stage • Religion
• Gender • Ethnicity
• Income • Generation
• Occupation

 This is the most popular bases for

segmenting customer groups.
 Age and life-cycle segmentation – Dividing
a market into different age and life-cycle
groups.

 Gender segmentation – Dividing a market

based on sex, i.e. male and female segments.

 Income segmentation – Dividing a market

into different income segments e.g. affluent,
middle income and low income.
 Psychographic segmentation – Dividing a
market into different segments based on social
class, lifestyle or personality characteristics.

 People in the same demographic group can have

very different psychographic characteristics.

 Brand tribes – Communities of core customers

with shared characteristics, brand experiences
and strong affinities for a particular brand.
 Behavioural segmentation – Dividing a
market into segments based on consumer
knowledge, attitudes, uses of a product or
responses to a product.

 Buyers can be grouped according to:

Benefits User Usage Loyalty
Occasions
Sought Status Rate Status
 Occasion segmentation – Dividing a market
into segments according to occasions when
buyers get the idea to buy, actually make
their purchase or use the purchased item.

 Benefit segmentation – Dividing the market

into segments according to the different
benefits that consumers seek from the
product.
Other forms of segmentation:
User Status Usage Rate Loyalty Status

Nonusers Light users Brand

Ex-users Medium users Stores

Potential users Heavy users Company

Degree of
First-time users
loyalty

Regular users
 Marketers rarely limit segmentation to a single
variable.
 Instead, multiple segmentation bases are used
in an effort to identify smaller, better defined
target groups.
 Useful information services for multivariable
segmentation are Nielsen, Acxiom, Experian.
 They use geographic, demographic, lifestyle and
behavioural data to help segment markets down to
zip code, neighborhoods or even households.
 Example of Experian segmentation:
 Business markets can be segmented using some of the same
variables which apply to consumer markets (yellow) as well
as additional variables (blue):

Operating
Geographic Demographic Behavioural
characteristics

Purchasing Situational Personal

approaches factors characteristics

 Demographic variables would differ – Industry, company size

  International markets can be segmented by:

Geographic Economic Political & Cultural

Location Factor Legal Factors Factors

 Intermarket (cross-market) segmentation –

Forming segments of consumers who have
similar needs and buying behaviours even
though they are located in different countries.
 Effective segments are:
 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.
 Actionable – Effective programs can be designed for
attracting and serving the segments.
 Market Targeting – Evaluating each market
segment’s attractiveness and selecting one or
more segments to enter.

 Target Market – Consists of a set of buyers

sharing common needs or characteristics that
the company decides to serve.
 Three (3) factors must be taken into
consideration:

 Segment Size and Growth

 Structural Attractiveness

 Company Objectives & Resources

 The Company must decide on which and how
many segments it will target.

 Market-Targeting Strategies:
 Undifferentiated (mass) marketing – A market-
coverage strategy in which a firm decides to
ignore market segment differences and go after
the whole market with one offer.
 Focuses on what is common in the needs of
consumers rather than on what is different.
 The company designs a product and marketing
program that will appeal to the largest number
of buyers.
 Differentiated (segmented) marketing – A
market-coverage strategy in which a firm
decides to target several market segments and
designs separate offers for each

 The aim is to achieve higher sales and stronger

position within each market segment.

 The challenge is that it increases the cost of

doing business.
 Concentrated (niche) marketing – A market-
coverage strategy in which a firm goes after a large
share of one or more few segments or niches.

 The aim is to achieve a strong market position using

greater knowledge of consumer needs in the niches it
serves.

 Enables marketing to be more effective and efficient.

 Useful for companies with limited resources.

 Micromarketing – Tailoring products and
marketing programs to the needs and wants
of specific individuals and local customer
segments.

 Two (2) types:

 Local marketing
 Individual marketing
 Local marketing – Tailoring brands and marketing to the
needs and wants of local customer segments:
 Cities
 Neighborhoods
 Specific stores

 Location-based marketing is on the rise due to advances in

communications technology.
 SoLoMo (Social + Local + Mobile) Marketing – Reaching on the
go consumers as they come and go in key local markets

 Challenges companies must overcome:

 Increased manufacturing and marketing costs
 Logistics problems
 Individual marketing – Tailoring products and
marketing programs to the needs and preferences of
individual customers.
 Also called “one-to-one marketing”, “mass
customization” and “markets-of-one marketing”.
 Mass customization is the process by which
companies interact one to one with masses of
customers to design products and services tailor-
made to individuals.
 This provides a way to stand out against competition.
 Factors to consider:
 Company resources
 Product variability
 Product life-cycle stage
 Market variability
 Competitor’s marketing strategies
 Targeting helps companies become more
efficient and effective by focusing on the
segments that they can satisfy best and most
profitably.
 It also benefits consumers with specific needs.
 However, target marketing has raised concerns
regarding:
 Targeting the vulnerable – Eg. Children
 Targeting segments with questionable products
 Differentiation – Differentiating the market
offering to create superior customer value.

 Positioning – Arranging for a market offering

to occupy a clear, distinctive and desirable
place relative to competing products in the
minds of target consumers.
 Product position - The way a product is defined by
consumers on important attributes—the place the
product occupies in consumers’ minds relative to
competing products.
 This is a complex set of:
 Perceptions
 Impressions
 Feelings

 “Products are made in factories, but brands happen in

the minds of consumers” (Kotler, 2016)
 Marketers often prepare perceptual positioning maps that show
consumer perceptions of their brands vs those of competing
products on important buying dimensions.
 This consists of three (3) steps:
 Identifying a set of possible differentiations that
create competitive advantage
 Choosing advantages on which to build a position
 Selecting an overall positioning strategy

 The company must then communicate and

deliver the chosen position to the market.
 Competitive Advantage – A advantage over
competitors gained by offering greater customer
value, either by having lower prices or providing more
benefits that justify higher prices.

 This can be done on the basis of:

 Product differentiation
 Service differentiation
 Channel differentiation
 People differentiation
 Image differentiation
 In choosing the right competitive advantage
companies must decide:
 How many differences to promote
 Which differences to promote
1. Important
2. Distinctive
3. Superior
4. Communicable
5. Preemptive
6. Affordable
7. Profitable
 Value proposition – The full mix of benefits on which
the brand is positioned.
 Companies can choose from one of five value
propositions to position products:
 More for more
 More for the same
 Same for less
 Less for much less
 More for less

 Companies must effectively communicate and deliver

the chosen position to the market.
 Positioning Statement - A statement that summarizes
company or brand position using the form:
To (target segment and need) our (brand) is (concept) that
(point of difference)
E.g. Evernote: “To busy multi-taskers 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 the company calls for action – Implementation
is key.
 The End

Any questions?