Chapter 6: Customer Value-Driven Marketing Strategy Flashcards
Market segmentation
involves dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviours and who might require separate marketing strategies or mixes.
Market targeting (or targeting)
consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
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
Segmenting Consumer Markets
Major variables: geographic, demographic, psychographic, and behavioural variables.
Geographic Segmentation
calls for dividing the market into different geographical units, such as nations, regions, provinces, cities, or even neighbourhoods.
Demographic Segmentation
divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.
age and life-cycle segmentation
offering different products or using different marketing approaches for different age and life-cycle groups
Gender segmentation
has long been used in marketing clothing, cosmetics, toiletries, toys, and magazines.
income segmentation
Dividing market into income segments
Psychographic segmentation
divides buyers into different segments based on lifestyle or personality characteristics. People in the same demographic group can have very different psychographic characteristics.
Behavioural Segmentation
divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product. Many marketers believe that behaviour variables are the best starting point for building market segments.
Occasion segmentation
Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchases, or use the purchased items.
Starbucks has welcomed the autumn season with its pumpkin spice latte (PSL).
Sold only in the fall, PSLs pull in $80 million in revenues for Starbucks each year
Benefit segmentation
requires finding the major benefits people look for in a product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.
User Status
Markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users of a product.
Usage Rate
Markets can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption
Loyalty Status
Consumers can be loyal to brands (Tide), stores (Canadian Tire), and companies (Apple). Buyers can be divided into groups according to their degree of loyalty.
Yet business marketers also use some additional variables, such as
customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.
Intermarket segmentation (also called cross-market segmentation),
marketers form segments of consumers who have similar needs and buying behaviours even though they are located in different countries
To be useful, market segments must be
MEASURABLE ACCESSIBLE SUBSTANTIAL DIFFERENTIABLE ACTIONABLE
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. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.
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
In evaluating different market segments, a firm must look at three factors:
1) segment size and growth,
2) segment structural attractiveness,
3) and company objectives and resources
For example, 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
A target market
consists of a set of buyers who share common needs or characteristics that a company decides to serve
Market targeting can be carried out at several different levels
companies can target:
1) very broadly (undifferentiated marketing),
2) very narrowly (micromarketing),
3) or somewhere in between (differentiated or concentrated marketing).
Undifferentiated Marketing (mass marketing)
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 (segmented marketing)
a firm decides to target several market segments and designs separate offers for each
concentrated marketing (or niche marketing)
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.
Micromarketing
is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments.
Local Marketing
involves tailoring brands and promotions to the needs and wants of local customers.
Individual Marketing
tailoring products and marketing programs to the needs and preferences of individual customers
Mass customization
is the process by which firms interact one to one with masses of customers to design products, services, and marketing programs tailor-made to individual needs.
A product position
is the way a product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products
Competitive advantage
To build profitable relationships with target customers, marketers must understand customer needs and deliver more customer value better than competitors do. To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage.
A difference is worth establishing to the extent that it satisfies the following criteria:
IMPORTANT DISTINCTIVE SUPERIOR COMMUNICABLE PREEMPTIVE AFFORDABLE PROFITABLE
value proposition
the full mix of benefits on which a brand is differentiated and positioned.
In the following sections, we discuss the five winning value propositions:
1) more for more,
2) more for the same,
3) the same for less,
4) less for much less,
5) more for less.
1) more for more,
involves providing the most upscale product or service and charging a higher price to cover the higher costs. A more-for-more market offering not only offers higher quality, it also gives prestige to the buyer.
EXAMPLES: Four Seasons hotels, Patek Philippe watches, Starbucks coffee, Louis Vuitton handbags, Mercedes automobiles, SubZero appliances—each claims superior quality, craftsmanship, durability, performance, or style and therefore charges a higher price.
2) more for the same
A company can attack a competitor’s value proposition by positioning its brand as offering more for the same price
Example: target
3) the same for less,
Offering the same for less can be a powerful value proposition—everyone likes a good deal. Discount stores such as Walmart and “category killers” such as Costco, PetSmart, and DSW Shoes use this positioning
4) Less for much less
A market almost always exists for products that offer less and therefore cost less. Few people need, want, or can afford “the very best” in everything they buy. In many cases, consumers will gladly settle for less-than-optimal performance or give up some of the bells and whistles in exchange for a lower price.
5) More for Less
Of course, the winning value proposition would be to offer more for less.
Yet in the long run, companies will no doubt find it very difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the “for-less” promise
positioning statement
The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference)
Once a company has decided which segments to enter, it must decide on its
differentiation and positioning strategy
The differentiation and positioning task consists of three steps:
identifying a set of possible differentiations that create competitive advantage, choosing advantages on which to build a position, and selecting an overall positioning strategy.
