Chapter 6 - Customer-Driven Marketing Strategy-Creating Value For Target Customers

Chapter Outline
A. Market Segmentation
- Segmenting Consumer Markets
- Segmenting Business Markets
- Segmenting International Markets
B. Market Targeting
- Evaluating Market Segments
- Selecting Target Market Segments
C. Differentiation and Positioning
- Positioning Maps
- Choosing a Differentiation and Positioning
Strategy Copyright 2017 Pearson Education, Ltd
(Armstrong, Kotler & Opresnik)
Designing a Customer-Driven
Marketing Strategy
Copyright 2017 Pearson Education, Ltd

A. Market Segmentation
Market segmentation involves dividing a

market into smaller segments of buyers with
distinct needs, characteristics or behaviors
that might require separate marketing
strategies or mixes.

Major Segmentation Variables for
Consumer Markets
Geographic Segmentation
Geographic segmentation calls for dividing the

market into different geographical units
such as nations, regions, states, counties, cities,
neighborhoods or even climate.

Demographic Segmentation
Demographic segmentation divides the market

into segments based on variables such as age,
life-cycle, gender, income, occupation,
education, religion, ethnicity and generation.

Age and Life-Cycle Stage

• Age and life-cycle segmentation is offering
different products or using different
marketing approaches for different age
and life-cycle groups.
Gender
• Gender segmentation has long been used
in clothing, cosmetics, toiletries and
magazines. Copyright 2017 Pearson Education, Ltd
Income
• Income segmentation has long been used
by marketers for products and services
such as automobiles, clothing, cosmetics,
financial services and travel.

Psychographic Segmentation
Psychographic segmentation divides buyers into

different segments based on social class,
lifestyle or personality characteristics.

Lifestyle segmentation groups individuals

according to how they spend their time, the
importance of things in their surroundings,
beliefs about themselves and broad issues and
some demographic characteristics such as
income and education. E.g. activities, interests
and opinions (AIOs).

When appealing to a personality characteristics,

a marketer almost always selects one that many
people view positively.

Behavioral Segmentation
Behavioral Occasions
segmentation
divides buyers into Benefits sought
segments based on
their knowledge, User Status
attitudes, uses or
Usage Rate
responses to a
product. Loyalty Status

Occasion segmentation
• Is 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
• Is dividing the market into segments
according to the different benefits that
consumers seek from the product.
User status
• Is segmenting the market into nonusers,
ex-users, potential users, first-time users
and regular users of a product.
Usage rate
• Is segmenting the market into light,
medium and heavy product users.

Loyalty status
• Is segmenting buyers into groups
according to their degree of loyalty.

Using multiple segmentation bases
• Marketers rarely limit their segmentation

analysis to only one or a few variables.
Rather, they often use multiple
segmentation bases in an effort to identify
smaller, better-defined target groups.

Segmenting Business and
International Markets
• Operating characteristics • Geographic location (common

• Purchasing approaches traits/behavior)
• Situational factors • Economic (population income/
• Personal characteristics economic development)
• Political (stability of government)
• Legal (monetary policy)
• Cultural (language/ religion)
International
Business
markets

Requirements for Effective Segmentation
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.

Requirements for Effective Segmentation
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.

B. Market Targeting
Market targeting refers to the process of

evaluating each market segment’s
attractiveness and selecting one or more
segments to enter.

Evaluating Market Segments
Segment size and

growth
Segment structural
attractiveness
Company objectives
and resources
Segment size and growth

• The largest, fastest-growing segments are
not always the most attractive ones for
every company.

Structural attractiveness
• A segment is less attractive if it already
contains many strong and aggressive
competitors or if it is easy for new entrants
to come into the segment.
• The existence of many actual or potential
substitute products may limit prices and
the profits.
• The relative power of buyers also affects
segment attractiveness.
• A segment may be less attractive if it

contains powerful suppliers who can
control prices.
Company objectives and resources

• The segments must mesh with the
company’s long-run objectives.
• The company must have the skills and
resources needed to succeed in an
attractive segment.
Selecting Target Market Segments
A target market consists of a set of buyers

who share common needs or characteristics
that the company decides to serve.

Market Targeting Strategies

Undifferentiated Marketing
• Using an undifferentiated marketing (or
mass marketing) strategy, a firm might
decide to ignore market segment
differences and target the whole market
with one offer.
• Such a strategy focuses on what is
common in the needs of consumers rather
than on what is different.
Differentiated Marketing
• Using a differentiated marketing (or
segmented marketing) strategy, a firm
decides to target several market segments
and designs separate offers for each.
•

Concentrated Marketing
• Concentrated marketing also called as niche
marketing strategy.
•Instead of going after a small share of a large
market, a firm goes after a large share of one or
a few smaller segments or niches.
• It can market more effectively by fine-tuning
its products, prices and programs to the needs
of carefully defined segments.
iv) Micromarketing
• Micromarketing is the practice of tailoring
products and marketing programs to suit
the tastes of specific individuals and
locations.
 Local marketing involves tailoring brands

and promotions to the needs and wants of
local customer groups – cities,
neighborhoods, and specific stores.
 Individual marketing involves tailoring

products and marketing programs to the
needs and preferences of individual
customers.

Think About It
 Mont Blanc pens are

known for high quality
and high prices
 What targeting
strategy does Mont
Blanc use?
• Undifferentiated
• Concentrated
• Differentiated
Copyright 2017 Pearson Education, Ltd (Armstrong, Kotler &

Opresnik)
Choosing a Targeting Strategy
Which strategy is best depends on the following

factors:
• Company’s resources
• Degree of product variability/changes
• Product’s life-cycle stage
• Market variability/changes
• Competitors’ marketing strategies

C. Differentiation and Positioning
Differentiation involves actually differentiating

the firm’s market offering to create superior
customer value.
Positioning consists of arranging for a market

offering to occupy a clear, distinctive and
desirable place relative to competing products
in the minds of target consumers.

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 the
consumer’s mind relative to competing
products.

Positioning Maps
Positioning maps
show consumer
perceptions of
their brands
versus competing
products on
important buying
dimensions.

Choosing a Differentiation and Positioning
Strategy
Identifying a set of differentiating
competitive advantages
Choosing the right competitive

advantages
Selecting an overall positioning

strategy
Communicating and delivering the

chosen position to the market
1. Identifying Possible Value Differences
and Competitive Advantages
Competitive advantage is an advantage over

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

2. Choosing the Right Competitive Advantage
Important Distinctive Superior
Communicable Preemptive Affordable
Developing a USP for each brand and sticking to it.

3. Selecting an Overall Positioning Strategy
The value proposition is the full positioning of a

brand - the full mix of benefits upon which it is
positioned.
Copyright 2017 Pearson Education, Ltd 6 - 41

Winning Value Propositions
Value proposition Description
More for more • Provides the most upscale product or service
• Charges a higher price to cover the higher costs
More for the same • High quality at lower prices
• Can be used to attack a more-for-more positioning
The same for less • Gives a good deal
• Used by discount stores that offer deep discounts based
on superior purchasing power and lower-cost
operations
Less for much less • Meeting consumers’ lower performance or quality
requirements at a much lower price
More for less • Best winning proposition
• Very difficult for companies to sustain such best-of-both
positioning
Developing a Positioning Statement
• Positioning statement summarizes company or
brand positioning using this form: To (target
segment and need) our (brand) is (concept)
that (point of different).

4. Communicating and Delivering the
Chosen Position
• Choosing the positioning is often easier than
implementing the position.
• Establishing a position or changing one usually

takes a long time.
• Maintaining the position requires consistent

performance and communication.

Looking Ahead to Chapter 7
Products, Services,
Brands Building Customer
and
Value

Chapter 6 - Customer-Driven Marketing Strategy-Creating Value For Target Customers

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Chapter Outline

Copyright 2017 Pearson Education, Ltd

Market segmentation involves dividing a

Copyright 2017 Pearson Education, Ltd

Geographic segmentation calls for dividing the

Copyright 2017 Pearson Education, Ltd

Demographic segmentation divides the market

Copyright 2017 Pearson Education, Ltd

Age and Life-Cycle Stage

Copyright 2017 Pearson Education, Ltd

Psychographic segmentation divides buyers into

Copyright 2017 Pearson Education, Ltd

Lifestyle segmentation groups individuals

Copyright 2017 Pearson Education, Ltd

When appealing to a personality characteristics,

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

• Marketers rarely limit their segmentation

Copyright 2017 Pearson Education, Ltd

• Operating characteristics • Geographic location (common

Copyright 2017 Pearson Education, Ltd

Measurable – The size, purchasing power and

Accessible – The market segments can be

Substantial – The market segments are large or

Copyright 2017 Pearson Education, Ltd

Differentiable – The segments are

Actionable – Effective programs can be

Copyright 2017 Pearson Education, Ltd

Market targeting refers to the process of

Copyright 2017 Pearson Education, Ltd

Segment size and

Segment size and growth

Copyright 2017 Pearson Education, Ltd

• A segment may be less attractive if it

Company objectives and resources

A target market consists of a set of buyers

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

 Local marketing involves tailoring brands

 Individual marketing involves tailoring

Copyright 2017 Pearson Education, Ltd

 Mont Blanc pens are

Copyright 2017 Pearson Education, Ltd (Armstrong, Kotler &

Which strategy is best depends on the following

Copyright 2017 Pearson Education, Ltd

Differentiation involves actually differentiating

Positioning consists of arranging for a market

Copyright 2017 Pearson Education, Ltd

A product’s position is the way the product is

Copyright 2017 Pearson Education, Ltd

Copyright 2017 Pearson Education, Ltd

Choosing the right competitive

Selecting an overall positioning

Communicating and delivering the

Competitive advantage is an advantage over

Copyright 2017 Pearson Education, Ltd

Important Distinctive Superior

Communicable Preemptive Affordable

Developing a USP for each brand and sticking to it.

Copyright 2017 Pearson Education, Ltd