Chapter 6: Customer Value-Driven Marketing Strategy

Question 1

Market segmentation

Answer 1

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.

Question 2

Market targeting (or targeting)

Answer 2

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

Question 3

Differentiation

Answer 3

involves actually differentiating the firm’s market offering to create superior customer value.

Question 4

Positioning

Answer 4

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 5

Segmenting Consumer Markets

Answer 5

Major variables: geographic, demographic, psychographic, and behavioural variables.

Question 6

Geographic Segmentation

Answer 6

calls for dividing the market into different geographical units, such as nations, regions, provinces, cities, or even neighbourhoods.

Question 7

Demographic Segmentation

Answer 7

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

Question 8

age and life-cycle segmentation

Answer 8

offering different products or using different marketing approaches for different age and life-cycle groups

Question 9

Gender segmentation

Answer 9

has long been used in marketing clothing, cosmetics, toiletries, toys, and magazines.

Question 10

income segmentation

Answer 10

Dividing market into income segments

Question 11

Psychographic segmentation

Answer 11

divides buyers into different segments based on lifestyle or personality characteristics. People in the same demographic group can have very different psychographic characteristics.

Question 12

Behavioural Segmentation

Answer 12

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.

Question 13

Occasion segmentation

Answer 13

Buyers can be grouped according to occasions when they get the idea to buy, actually make their purchases, or use the purchased items.

Question 14

Starbucks has welcomed the autumn season with its pumpkin spice latte (PSL).

Answer 14

Sold only in the fall, PSLs pull in $80 million in revenues for Starbucks each year

Question 15

Benefit segmentation

Answer 15

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.

Question 16

User Status

Answer 16

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

Question 17

Usage Rate

Answer 17

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

Question 18

Loyalty Status

Answer 18

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.

Question 19

Yet business marketers also use some additional variables, such as

Answer 19

customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.

Question 20

Intermarket segmentation (also called cross-market segmentation),

Answer 20

marketers form segments of consumers who have similar needs and buying behaviours even though they are located in different countries

Question 21

To be useful, market segments must be

Answer 21

MEASURABLE
ACCESSIBLE
SUBSTANTIAL
DIFFERENTIABLE
ACTIONABLE

Question 22

MEASURABLE

Answer 22

The size, purchasing power, and profiles of the segments can be measured.

Question 23

ACCESSIBLE

Answer 23

The market segments can be effectively reached and served.

Question 24

SUBSTANTIAL

Answer 24

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 25

DIFFERENTIABLE

Answer 25

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

Question 26

ACTIONABLE

Answer 26

Effective programs can be designed for attracting and serving the segments

Question 27

In evaluating different market segments, a firm must look at three factors:

Answer 27

1) segment size and growth,
2) segment structural attractiveness,
3) and company objectives and resources

Question 28

For example, a segment is less attractive if it already contains

Answer 28

many strong and aggressive competitors or if it is easy for new entrants to come into the segment

Question 29

A target market

Answer 29

consists of a set of buyers who share common needs or characteristics that a company decides to serve

Question 30

Market targeting can be carried out at several different levels

Answer 30

companies can target:

1) very broadly (undifferentiated marketing),
2) very narrowly (micromarketing),
3) or somewhere in between (differentiated or concentrated marketing).

Question 31

Undifferentiated Marketing (mass marketing)

Answer 31

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

Question 32

Differentiated Marketing (segmented marketing)

Answer 32

a firm decides to target several market segments and designs separate offers for each

Question 33

concentrated marketing (or niche marketing)

Answer 33

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.

Question 34

Micromarketing

Answer 34

is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments.

Question 35

Local Marketing

Answer 35

involves tailoring brands and promotions to the needs and wants of local customers.

Question 36

Individual Marketing

Answer 36

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

Question 37

Mass customization

Answer 37

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.

Question 38

A product position

Answer 38

is the way a product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products

Question 39

Competitive advantage

Answer 39

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.

Question 40

A difference is worth establishing to the extent that it satisfies the following criteria:

Answer 40

IMPORTANT
DISTINCTIVE
SUPERIOR
COMMUNICABLE
PREEMPTIVE
AFFORDABLE
PROFITABLE

Question 41

value proposition

Answer 41

the full mix of benefits on which a brand is differentiated and positioned.

Question 42

In the following sections, we discuss the five winning value propositions:

Answer 42

1) more for more,
2) more for the same,
3) the same for less,
4) less for much less,
5) more for less.

Question 43

1) more for more,

Answer 43

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.

Question 44

2) more for the same

Answer 44

A company can attack a competitor’s value proposition by positioning its brand as offering more for the same price

Example: target

Question 45

3) the same for less,

Answer 45

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

Question 46

4) Less for much less

Answer 46

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.

Question 47

5) More for Less

Answer 47

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

Question 48

positioning statement

Answer 48

The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference)

Question 49

Once a company has decided which segments to enter, it must decide on its

Answer 49

differentiation and positioning strategy

Question 50

The differentiation and positioning task consists of three steps:

Answer 50

identifying a set of possible differentiations that create competitive advantage, choosing advantages on which to build a position, and selecting an overall positioning strategy.