Chapter 6: Customer-Driven Marketing Strategy — Creating Value for Target Customers

Question 1

Discuss segmentation.

Answer 1

Segmentation is the act of dividing the entire market of buyers into smaller units with distinct needs, characteristics or behaviors that might require separate marketing strategies.

Market segmentation can be divided into 3 main parts:
1) Consumer market
2) Business market
3) International market

Question 2

Discuss consumer market segmentation.

Answer 2

Consumer market segmentation has 4 bases in dividing up the market:
1) Geographic – dividing the market into different geographic units; variables include world region or country, city or metro size, density, climate

2) Demographic — dividing the market based on the structure of population; variables include age (avoid stereotypes; positive message to mature customers), gender (neglect -> new opportunities), income (people with low annual incomes can be a lucrative market; troubled economy makes marketing to all income groups a challenge)

3) Psychographic — dividing the market based on social class, lifestyle or personality characteristics e.g. different focus of newspapers -> NATGEO, Thairath

4) Behavioral — dividing the market based on consumer knowledge, attitudes, uses, or responses to a product; further divided into:
a) occasion - basically festivals e.g. Valentine’s Day
b) benefit sought - different segments want different benefits e.g. SCB’s Kingpower Platinum, Sansiri Platinum
c) user status - nonusers, ex-users, potential users, first-time users, regular users
d) usage rate - light, medium, heavy
e) loyalty status - shopee silver, gold, platinum

Question 3

Should marketers use only a single base to segment the market?

Answer 3

No, marketers should use multiple bases to segment in order to identify smaller, better-defined groups. Marketers should start with a single base and then expand to other bases.

Question 4

Discuss business market segmentation.

Answer 4

In business market segmentation, there are 4 bases in segmenting:
1) Operating characteristics — technology, user/nonuser status, customer capabilities

2) Purchasing approaches — purchasing function, power structure, nature of existing, general purchase policies, purchasing criteria

3) Situational factors — urgency, specific application, size of order

4) Personal characteristics — buyer-seller similarity, loyalty, attitudes toward risk

Question 5

Discuss international marketing segmentation.

Answer 5

In international market segmentation, there are 5 bases, 4 of which is the same as consumer market’s. The additional base is intermarket segmentation, dividing into consumers who have similar needs and buying behaviors although they are in different countries.

Question 6

What are the requirements for effective segmentation?

Answer 6

The requirements for effective segmentation include
1) measurability — can it be measured?
2) accessibility — is hard to access and enter?
3) substantialness — is it big enough?
4) differentiability — is it different from others?
5) actionability — are there enough resources?

Question 7

What is targeting?

Answer 7

Targeting is the act of choosing a target market, which is the set of buyers who share common needs or characteristics that the company decides to serve.

Question 8

How should firms select target market segments?

Answer 8

Firms should evaluate and select target market segments based on its size (largest isn’t always the best), structural competitiveness (competition, substitute products, power of buyers and suppliers are examined), fit with company objectives and company resources.

Question 9

Identify the types of marketing targeting strategies.

Answer 9

There are 4 types of targeting strategies:
1) Undifferentiated (mass) marketing — ignore segmentation opportunities and goes after the whole market with one offer; rarely succeeds e.g. water, salt, rice

2) Differentiated (segmented) marketing — targets several segments and designs separate offers for each; high cost e.g. Toyota (Vios, Altis, Camry)

3) Concentrated (niche) marketing – targets one or a couple of small segments; usually adapted by SMEs

4) Micromarketing — tailoring products to suit specific individuals and locations; divided into local and individual (one-to-one-) marketing

Question 10

What do firms need to consider when choosing a targeting strategy?

Answer 10

Firms need to consider these factors when choosing a targeting strategy:
1) Company resources
2) Product variability
3) Product’s life-cycle stage
4) Market variability
5) Competitor’s marketing strategies

Question 11

Discuss socially responsible targeting.

Answer 11

For socially responsible targeting, firms should seek to target the market in a way that does not harm the society. Firms should not seek to make a profit at the expense of segments. An example of a firm that didn’t follow through with this would be McDonald whereas they specifically put toys in their happy meals, making it apparent that they are targeting young children. This harms the society in that it contributes to obesity in children.

Question 12

Discuss positioning.

Answer 12

Positioning is the way a product is defined by consumers on important attributes; or the place a product occupies in the consumer’s minds relative to competing products.

Question 13

Identify and discuss a tool used in positioning.

Answer 13

A perceptual positioning map can be used to help define a brand’s position, using two key dimensions. It is useful for planning differentiation and positioning strategies.

Question 14

Discuss how companies differentiate and position their products for maximum competitive advantage.

Answer 14

There are three main steps when firms differentiate and position a product:
1) Identifying a set of differentiating competitive advantages — types of differentiation: product (product attributes), services (convenience, speed, empathy), channels (retail vs online), people (superior staffs), image (brand image)

2) Choosing the right competitive advantages — how many and which to promote; beware that promoting too many selling points can confuse consumers -> each difference can create company costs as well as benefits

3) Selecting an overall positioning strategy —nine squares

Question 15

Define competitive advantage.

Answer 15

Competitive advantage is an advantage over competitors gained by offering greater customer value. Firms can increase the value of their products by either offering more benefits or lowering prices.

Question 16

Should strategies in a customer-driven marketing strategy be permanent and why?

Answer 16

No, they shouldn’t be permanent because there could be changes in consumer needs and competitors’ strategies over time. Firms should seek to monitor and adapt the position to match the said changes.

Question 17

Identify the three domains value can be created in.

Answer 17

1) Functional value = measured by the offer’s functional, utilitarian, or physical performance
2) Psychological value = measured by the emotional benefits received from using that product
3) Monetary value = measured by the price paid relative to other alternatives e.g. price, fees, discounts

Question 17

Identify the three domains value can be created in.

Answer 17

1) Functional value = measured by the offer’s functional, utilitarian, or physical performance
2) Psychological value = measured by the emotional benefits received from using that product
3) Monetary value = measured by the price paid relative to other alternatives e.g. price, fees, discounts

Question 18

What is customer value?

Answer 18

Customer value = prospective evaluation - customer’s evaluation

Question 19

How can marketers increase the value of offerings?

Answer 19

1) Increasing total customer benefit
2) Decreasing total customer cost

Question 20

What are the criteria for Point of Difference?

Answer 20

1) Desirable - it is something that could be wanted
2) Deliverable - it is something that could be delivered
3) Differentiating - it is something that is different from others

Question 21

What is straddle positioning?

Answer 21

Straddle positioning is when brands look to position itself in two categories simultaneously; point of parity + point of difference

Question 22

Explain how a company should develop a value proposition and a positioning strategy.

Answer 22

Companies should first segment and target the markets first. Then, they should identify a set of competitive advantages, select the best one(s), and then select an overall positioning strategy.

Question 23

Describe how a company chooses a frame of reference.

Answer 23

Companies could begin with category membership - a type of frame of reference - where they identify brands that could function as substitutes.

Question 24

Discuss how a company identifies points of parity and points of difference.

Answer 24

Companies can identify points of parity by looking at what attributes their product have that is shared with competitor’s products. For points of difference, they should look at attributes that competitors cannot provide.

Question 25

Define the key strategies for creating a sustainable competitive advantage.

Answer 25

1) Differentiate on an existing attribute
2) Introducing a new attribute
3) Build a strong brand

Question 26

Identify alternative strategies to communicate the positioning of a company’s offerings.

Answer 26

Companies could communicate
1) their offering’s category membership
2) points of parity and points of difference
or
3) develop a narrative to convey the offering’s positioning