Chapter 6: Customer-Driven Marketing Strategy (Creating Value for Target Customers) - incomplete

Question 1

What do companies today recognise?

Answer 1

That they cannot appeal to all buyers in the marketplace, or at least not to all buyers in the same way.

This is because buyers are too numerous, too widely scattered, and too varied in their needs and buying practices.

Thus, most companies have moved away from mass marketing and towards target marketing.

Question 2

What is target marketing?

Answer 2

Identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.

Question 3

What is the ‘rifle’ approach and what is the ‘shotgun’ approach?

Answer 3

‘Shotgun’ approach - scattering their marketing efforts.

‘Rifle’ approach - firms focusing on the buyers who have greater interest in the values they create best.

Question 4

What are the four steps in developing a customer driven marketing strategy?

Answer 4

. Market segmentation
. Market targeting
. Differentiation
. Positioning

Question 5

What is market segmentation?

Answer 5

The process of analysing a market with the aim of directing marketing focus towards smaller segments of buyers with distinct characteristics or behaviours that might require separate marketing strategies or mixes.

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

The company identifies the different ways to segment the market and develops profiles of the resulting market segments.

Question 6

What is market targeting?

Answer 6

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

Question 7

What is differentiation?

Answer 7

This involves actually differentiating the firms market offering to create superior customer value.

Question 8

What is positioning?

Answer 8

Is 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.

Question 9

Summarise designing a customer-driven marketing strategy.

Answer 9

Which customers will we serve? And how will we serve them? The goal is to create value for targeted customers (more value than competitors offer).

Segmentation - divide the total market into smaller segments
Targeting - select the segment/segments to enter
Differentiation - differentiate the market offering to creat superior customer value
Positioning - position the market offering in the minds of target customers

Question 10

How do buyers in a market differ?

Answer 10

Buyers in a market differ in their wants, resources, locations, buying attitudes and buying practices.

Question 11

What does market segmentation do?

Answer 11

Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match their unique needs.

Question 12

What are four important segmentation topics?

Answer 12

. Segmenting consumer markets
. Segmenting business markets
. Segmenting international markets and
. Requirements for effective segmentation

Question 13

Segmenting consumer markets.

Answer 13

There is no single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure.

Question 14

What are some of the main segmentation variables?

Answer 14

. Geographic
. Demographic
. Psychographic
. Behavioural

Question 15

What is geographic segmentation?

Answer 15

Dividing a market into different geographical units such as nations, regions, states, local government areas, cities or neighbourhoods.

Table 6.1 examples: region, city size, density and climate.

A company may decide to operate in one or a few geographical areas, or to operate in all areas but they pay attention to geographical differences in needs and wants.

Question 16

What is demographic segmentation?

Answer 16

Dividing the market into segments based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation and nationality.

Question 17

Why are demographic factors the most popular bases for segmenting customer groups?

Answer 17

Reason 1: customer needs, wants and usage rates often vary closely with demographic variables.

Reasons 2: these variables are easier to measures than most other variables.

Question 18

Explain the following form of demographic segmentation: age and life-cycle segmentation.

Answer 18

Analysing a maker with the aim of directing marketing focus based on different age and life-cycle groups.

Marketers need to be careful they don’t follow stereotypes. Eg. Whilst some 40-year-old couples aware sending their children off to university, others are just beginning new families.

Question 19

Explain the following form of demographic segmentation: gender segmentation.

Answer 19

Dividing a market into different segments based in gender.

This has long been used by clothing, cosmetics, toiletries and magazine marketers.

An underdeveloped gender segment can offer new opportunities in markets ranging from consumer electronics to motorcycles. Eg. Harley-Davidson has traditionally targeted men between 35 and 55, but women are now among its fastest growing customer segments. As a result, it is boosting its appeal to women buyers.

Question 20

Explain the following form of demographic segmentation: income segmentation.

Answer 20

Dividing a market into different income segments.

Eg. Target affluent consumers with luxury goods and convenience survives.

However, now low, medium and high level earners all seek greater value from their purchases (luxury marketers have been hit the hardest as a result).

Question 21

What is psychographic segmentation?

Answer 21

Dividing a market into different segments based on social class, lifestyle or personality characteristics.

Table 6.1 examples:
. socio-economic (quintiles)
. status (where educated, income, occupation level)
. values, attitudes and lifestyle groupings (socially aware, look at me, basic needs, conservatism, conventional family life)
. personality (compulsive, ambitious, gregarious, authoritarian)

Question 22

Why is psychographic segmentation useful?

Answer 22

This is useful because the same demographic group can have very different psychographic profiles.

The products people buy often reflect their lifestyles. As a result, marketers often segment their markets by consumer lifestyles and base their marketing strategies on lifestyle appeals.

Marketers also use personality variables to segment markets.

Question 23

What is behavioural segmentation?

Answer 23

Dividing a market into segments based on consumer knowledge, attitudes, uses or responses to a product.

Mann marketers believe that behaviour variables are the best starting point for building market segments.

Table 6.1 examples:
. Purchases occasion (regular, occasion, special occasion)
. Benefits sought (quality, service, economy)
. User status (non-user, ex-user, potential user, first-time user,regular user)
. Usage rate (light user, medium user, heavy user)
. Loyalty status (non, medium, strong, absolute)
. Readiness stage (unaware, aware, info,ed, interested, desirous, intending to buy)
. Attitude towards product (enthusiastic, positive, indifferent, negative, hostile)

Question 24

Explain the following form of behavioural segmentation: occasion segmentation.

Answer 24

Dividing the market into segments according to occasions when buyers get the idea to buy, actually marker their purchases or use the purchased item.

Occasion segmentation can help firms build up product image. Eg. Most consumers of fruit juice drink it in the morning, but marketers such as boost juice want juices to be seen as a part of a healthy lifestyle and consumer throughout the day.

Question 25

Explain the following form of behavioural segmentation: benefit segmentation.

Answer 25

Analysing a market with the aim of directing marketing focus based on the different benefits that consumers seem from their products.

Question 26

Explain the following form of behavioural segmentation: user status.

Answer 26

Markets can be segmented into non-users, ex-users, potential users, first-time users and regular users of a product.

Marketers want to reinforce and retain regular users, attract targeted non-users, and reinvigorate relationships with ex-users.

Question 27

Explain the following form of behavioural segmentation: usage rate.

Answer 27

Markets can also be segments into light, medium and heavy product used.

Heavy users are often a small percentage of the market but account for a high percentage of total consumption.

Question 28

Explain the following form of behavioural segmentation: loyalty status.

Answer 28

A market can also be segmented by consumer loyalty. Consumers can be loyal to brands, stores and companies. Buyers can be divided into groups according to their degree of loyalty.

Some consumers are completely loyal - they buy one brand all the time.

Other users are somewhat loyal - they are loyal to two or three brands of a given product, or favour one brand while sometimes buying others.

Other buyers show no loyalty to any brand - they either want something different each time they buy or they buy whatever is a price special.

Question 29

What can a company learn by looking at how loyal customers are?

Answer 29

A company can learn a lot by analysing loyalty patterns in its market. It should start by studying its own loyal customers.

By looking at customers who are shifting away from its brand, the company can learn about its marketing weaknesses.

Question 30

Using multiple segmentation bases.

Answer 30

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

Such segmentation provides a powerful tool for marketers of all kinds. It can help companies identify and better understand key customer segments, target them more efficiently, and tailor market offerings and messages to specific needs.

Question 31

Segmenting business markets.

Answer 31

Consumer and business marketers use many of the same variable to segment their markets. Business buyers can be segmented geographically, demographically (industry, company size), or by benefit is sought, user status, usage rate and loyalty to status.

Yet business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors and personal characteristics.

Almost every company serves at least some business markets.

Buying behaviour and benefits provide the best basis for segmenting business markets.

Question 32

Segmenting international markets.

Answer 32

Few companies have either the resources or the will to operate in all, or even most, of the countries that dot the globe. Operating in many countries presents new challenges.

Companies can segment international markets using one or a combination of several variables.

Question 33

What are the challenges that come with operating in many countries?

Answer 33

Different countries, even those that are close together, can vary greatly in their economic, cultural and political makeup.

Thus international firms (like in domestic markets) need to group their world marketers into segments with distinct buying needs and behaviours.m

Question 34

What segmentation bases can be used for international markets?

Answer 34

. Geographic location
. Economic factors (population income levels, overall level of economic development) - shapes the population’s product and service needs, and the marketing opportunities it offers
. Political and legal factors (type and stability of Government, receptivity to foreign firms, monetary regulations and amount of bureaucracy)
. Cultural factors (common languages, religions, values and attitudes, customs and behavioural patterns)

Question 35

What is inter-market segmentation?

Answer 35

Forming segments of consumers who have similar needs and buying behaviour even though they are located in different countries.

Question 36

What are the requirements for effective segmentation?

Answer 36

Market segments must be:
. Measurable 
. Accessible
. Substantial
. Differntiable
. Actionable

Question 37

Explain the following requirement for effective segmentation: measurable.

Answer 37

The size, purchasing power and profiles of segments can be measured. Certain segmentation variables are difficult to measure.

Eg. Approximately 30.5 million left-handed people in the U.S. (Almost equalling the entire population of Canada). Yet, few products are targeted towards this segment. The main problem is that this segment is hard to identify and measure.

Question 38

Explain the following requirement for effective segmentation: accessible.

Answer 38

The market segments can be effectively reach and served.

Suppose a fragrance company finds that heavy users of its brand are single men and women who stay out late and socialise a lot. Unless their group lives or shops at certain places and is exposed to certain media, its members will be difficult to reach.

Question 39

Explain the following requirement for effective segmentation: substantial.

Answer 39

The market segments are large or profitable enough to serve.

A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.

Question 40

Explain the following requirement for effective segmentation: differentiable.

Answer 40

The segments are conceptually distinguishable and respond differently to different marketing elements and programs.

If married and unmarried women respond similarly to a sale on perfume, they do not constitute separate segments.

Question 41

Explain the following requirement for effective segmentation: actionable.

Answer 41

Effective programs can be designed for attracting and serving the segments.

Eg. Although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment.

Question 42

What does market segmentation reveal? And what do firms do after segmentation?

Answer 42

Market segmentation reveals the firm’s market segment opportunities.

The firm then has to evaluate the various segments and decide how many and which segments it can best serve.

Question 43

How does a company evaluate market segments?

Answer 43

A firm looks at three factors:
. Segment size and growth
. Segment structural attractiveness and
. Company objectives and resources

Question 44

What must a company do first when evaluating market segments?

Answer 44

The company must first collect and analyse data on current segment sales, growth rates and expected profitability of various segments.

It will be interested in segments that have the right size and growth characteristics.

Question 45

Why is the ‘right size and growth’ a relative matter?

Answer 45

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

Smaller companies may lack the skills and erosive so needed to serve the larger segments. Or they may find these segments too competitive.

Question 46

Explain the following factor used when evaluating market segments: examine major structural factors that affect long-run segment attractiveness.

Answer 46

A segment is less attractive if it already contains many strong and aggressive competitors.

The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment.

The relative power of buyers also affects segment attractiveness. Buyers with strong bargains power relative to sellers will try to force prices down, demand more services and set competitions against one another - all at the expense of seller profitability.

A segment may also be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services.

Question 47

Explain the following factor used when evaluating market segments: company objectives and resources.

Answer 47

Even if a segment has the right size and growth and is structurally attractive, the company must consider its own objectives and resources.

So,r attractive segments can be dismissed quickly because they do not mesh with the company’s long-run objectives.

Or the company may lack the skills and resources needed to succeed in an attractive segment.

Question 48

When should a company enter segments?

Answer 48

A company should only enter segments in which it can creat superior customer value and gain advantages over competitors.

Question 49

What is a target market?

Answer 49

A set of buyers sharing common needs or characteristics that the company decides to serve.

Market targeting can be carried out at several different levels.

Question 50

What are the different levels of market targeting?

Answer 50

. Undifferentiated marketing (mass marketing) - targeting broadly
. Differentiated (segmented) marketing
. Concentrated (niche) marketing
. Micro marketing (local or individual marketing) - targeting narrowly

Question 51

What is undifferentiated (mass) marketing?

Answer 51

A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.

This strategy focuses on what is common in the needs of consumers, rather than on what is different.

Marketing program is designed to appeal to the largest number of buyers.

Question 52

What is differentiated (segmented) marketing?

Answer 52

A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each.

By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segment.

Thus the company must weigh increase sales against increased costs when deciding gonna differentiated marketing strategy.

Developing a stronger position within several segments creates more total sales than undifferentiated marketing across all segments.

But differentiated marketing also increases the costs of doing business.

Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion planning and channel management.

Question 53

What is concentrated marketing/niche marketing?

Answer 53

A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches.

Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and special reputation it acquires.

It can market mor effectively by fine-tuning its products, prices and programs to the needs of carefully defined segments.

It can also market more efficiently, targeting its products or services, channels and communications programs towards only consumer that it can serve best and more profitability.

Niches tend to have only one or a few competitors.

Question 54

What is micromarketing?

Answer 54

The practice of tailoring products and marketing programs to the need and wants of specific individuals and local customer segments - includes local marketing and individual marketing.

Question 55

What is local marketing?

Answer 55

Tailoring brands and promotions to the needs and wants of local customer segments - cities, neighbourhoods, and even specific stores.

Question 56

What are the benefits of local marketing?

Answer 56

Local marketing helps a company to market more effectively in the face of pronounced regional and local differences in demographics and lifestyles. It also meets the needs of the company’s first-line customers (retailers) who prefer more finely tuned product assortments for their neighbourhoods.

Question 57

What are the downfalls of local marketing?

Answer 57

It can drive up manufacturing and marketing costs 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 brands overall image might be diluted if the product and message vary too much in different localities.

Question 58

What is individual marketing?

Answer 58

Tailoring products and marketing programs to the need and preferences of individual customers.

Also labelled ‘one-to-one marketing’, ‘customised marketing’ and ‘markets-of-one marketing’.

Today, new technologies are permitting many companies to return to customised marketing (which has become obscure since the widespread use of mass marketing).

Question 59

Benefits of individual marketing?

Answer 59

Mass customisation provides a way to stand out against competitors.

Made the relationships with customers more important than ever.

Question 60

What factors need to be considered when choosing a targeting strategy?

Answer 60

. Company resources
. Degree of product variability (products which can vary in design are more suited to differentiation and concentration eg. Cameras and cars, whilst uniform products are suited to undifferentiated marketing eg. Grapefruit and steel)
. The product’s life-cycle stage
. Market variability
. Competitors marketing strategies (when competitors use diff or concentrated marketing, undiff marketing can be suicidal. Whilst if competitors use undiff marketing, a firm can gain an advantage by using diff or concentrated marketing)

Question 61

What are the biggest issues that come with targeting (socially responsible marketing)?

Answer 61

The biggest issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products.

Controversies arise when marketers attempt to profit at the expense of targeted segments - when they unfairly target vulnerable segments or target them with questionable products or tactics.

Socially responsible marketing calls for segmentation a den targeting that serve not just the interest of the company but also the interest of those targeted.

Question 62

What is a value proposition?

Answer 62

How a company will creat differentiated value for targeted segments and what positions it wants to occupy in those segments.

Beyond deciding which segments of the market it will target, the company must decide on a value proposition.

Question 63

What is a products position?

Answer 63

The way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products.

A products position is the complex set of perceptions, impressions and feelings that consumers have for the product compared with competing products.

Consumes position products with or without the help of marketers.

Question 64

Why must marketers plan a products’ position?

Answer 64

Because marketers do not want to leave their products’ positions to chance. They must plan positions that will give their products the greatest advantage in selected target markets, and they must design marketing miles to create these planned positions.

Question 65

What are positioning maps?

Answer 65

They show consumer perceptions of their brands versus competing products on important buying dimensions buying dimensions.

The position of each circle on the map indicates the brand’s perceived positioning on two dimensions (different for every product). The size of each circle indicates the brand’s relative market share.

Question 66

Choosing a differentiation and positioning strategy.

Answer 66

Some firms find it easy to choose a differentiation and positioning strategy.

Whilst some firms will go after the same positions. Meaning each will have to find other ways to set itself apart.

What differentiation and positioning task consists of three steps:
. Identifying a set of differentiating competitive advantages upon which to build a position
. Choosing the right competitive advantages and
. Selecting an overall positioning statement

Question 67

What is a competitive advantage?

Answer 67

An advantage over competitor ones gained by offering greater customer value, either through lower prices, or by providing more benefits that justify higher prices.

Question 68

How can a company differentiate?

Answer 68

Along the lines of product, services, channels, people or image.

Question 69

Explain product differentiation.

Answer 69

Brands differentiated on features, performance of style and design.

Question 70

Explain services differentiation.

Answer 70

Differentiation through speedy, convenient or careful delivery.

Question 71

Explain channel differentiation.

Answer 71

Gain competitive advantage through the way they design their channel’s coverage, expertise and performance.

Question 72

Explain people differentiation.

Answer 72

Competitive advantage through hiring and training better people than competitors do.

Question 73

Explain image differentiation.

Answer 73

Conveys the products distinctive benefits and positioning.

Question 74

When is a difference worth establishing?

Answer 74

When it meets the following criteria:

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 customer 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.

Question 75

What is the value proposition?

Answer 75

This is the full positioning of the brand - the full ,is of benefits upon which it is positioned.

Question 76

What is a positioning statement?

Answer 76

A statement that summarises company or brand positioning.

It takes this form:
To (target segment and need) our (brand) is (concept) that (point of difference).

Eg. To young professionals, Green Kinetic Ltd. is a charging solution that gives you efficient and guilt free energy harvesting for all your personal devices through the power of your own movement.