Chapter6: Customer Value-driven Marketing Strategy: Creating Value For Target Customers Flashcards
Marketing strategy
Segmentation, market targeting, differentiation, positioning
Designing a customer value-driven market strategy
How do we create value for targeted customers?
- Select customers to serve
- segmentation: divide the total market into smaller segments
- targeting: select the segment or segments to enter - Decide on a value proposition
- differentiation: differentiate the market offering to create superior customer value
- positioning: position the market offering in the minds of target customers
Major segmentation variables for consumer markets
Geographic: nations, regions, provinces, cities neighbourhoods, population density (urban, suburban, rural), climate.
Demographic: age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation.
Psychographic: social class, lifestyle, personality.
Behavioural: occasions, benefits, user status, usage rate, loyalty status.
Geographic segmentation
Dividing a market into different geographical unit such as nations, states, regions, counties, cities, or neighbourhoods.
Demographic segmentation
Dividing a 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: dividing a market into different age and life-cycle groups.
Gender segmentation: dividing a market into different segments based on gender.
Income segmentation: dividing a market into different income segments.
Psychographic segmentation
Marketers segment their makers using variables such as social class, lifestyle, personality characteristics.
The products people buy reflect their lifestyles.
Behavioural segmentation
Occasion segmentation: segments divided according to occasions, when the buyers
- get the idea to buy
- make their purchase
- use the purchased item
Benefit segmentation: segments divided according to the different benefits that consumers seek from the product.
User status: markets can be segmented into nonusers, ex-users, potential users, first-time users, and regular users.
Usage rate: markets can be segmented into light, medium, and heavy product users.
Loyalty status: consumers can be loyal to brands, stores, and companies.
Multiple segmentation bases
Segmentation bases help companies to
- identify smaller, better-defined target groups
- identify and understand key customer segments
- reach customers more efficiently by tailoring market offerings and messages to customers’ specific needs.
Segmentation systems help marketers segment people and locations into marketable groups of like-minded consumers.
Segmenting business markets
Just like for consumer markets, business or organizational markets should be segmented in order for the firm to effectively develop a successful marketing program.
The segmentation bases for business markets vary a little in terminology but are quite similar in concept and application to the process of segmenting consumer markets.
Consumer and business markets use many of the same variables for segmentation.
Business buyers can be segmented geographically, demographically (industry, company size) or by benefits sought, user status, usage rate, and loyalty status.
Variables used by business marketers for segmentation include: operating characteristics, purchasing approaches, situational factors, personal characteristics.
Operating variables
Technology: what customer technologies should we focus on?
User or nonuser status: should we serve heavy users, medium users, light users, or nonusers?
Customer capabilities: should we serve customers needing many of few services?
Purchasing approaches
Purchasing-function organization: should we serve companies with highly centralized or decentralized purchasing organization?
Power structure: should we serve companies that are engineering dominated, financially dominated, and so on?
Nature of existing relationship: should we serve companies with which we have strong relationship or simply go after the most desirable companies?
General purchasing policies: should we serve companies that prefer leasing? Service contract? Systems purchases? Sales bidding?
Purchasing criteria: should we serve companies that are seeking quality? Service? Price?
Situational factors
Urgency: should we serve companies that need quick and sudden delivery or service?
Specific application: should we focus on certain application of our product rather than all applications?
Size or order: should we focus on large or small orders?
Personal characteristics
Buyer-seller similarity: should we serve companies whose people and values are similar to ours?
Attitude toward risk: should we serve risk-taking or risk-avoiding customers?
Loyalty: should we serve companies that show high loyalty to their suppliers?
Segmenting international markets
Variables include: geographic location, economic factors, political and legal factors, cultural factors.
Intermarket (cross-market) segmentation: grouping consumers with similar needs and buying behaviours irrespective of their location.
Requirements for effective segmentation
Measurable, accessible, substantial, differentiate, actionable.
Market targeting
Evaluating the various segments based on
- segment size and growth
- segment structural attractiveness
- company objectives and resources
Selecting target market segments
- target market: set of buyers sharing common needs or characteristics that the company decides to serve.
Market-targeting strategies
Targeting broadly ————————> targeting narrowly
Undifferentiated (mass) marketing —> differentiated (segmented) marketing —> concentrated (niche) marketing —> micro marketing (local or individual marketing).
Market targeting vs Target marketing
- Market targeting
Evaluating segments — profitability? Growth? Corporate objectives?
Selecting segments
- Target marketing
Undifferentiated marketing
Differentiated marketing
Niche marketing
Micro marketing
Market targeting
How companies identify attractive market segments and choose a market-targeting strategy.
Market-targeting involves:
Evaluating marketing segments
Consider segment size and growth, segment structural attractiveness, and company objectives and resources.
Evaluating market segments
Structural factors that affect long-run segment attractiveness (“five forces”):
1. Competitors
2. New entrants
3. Substitute products
4. Relative power of buyers
5. Power of suppliers
Selecting target market segments
- Undifferentiated marketing (mass marketing): firm ignores market segment differences.
- the company designs a product and a marketing program that will appeal to the largest number of buyers.
- targets the whole market with one offer (Walmart) - Differentiated (segmented) marketing: firm targets several market segments and designs separate offers for each
- Toyota produces Toyota, Yaris, & Lexus brands each targeting a different group of buyers. - Concentrated marketing (niche marketing): firm goes after a large share of one or a few segments or niches.
- Micromarketing: firm tailors products and marketing programs to the needs of specific segments (includes local and individual marketing).
- local marketing: most convenience stores
- individual marketing-custom tailors or mass customization.
Choosing a targeting strategy
Factors to consider: company resources, product variability, product’s life-cycle stage, market variability, competitors’ marketing strategies.
Socially responsible target marketing
Controversy and concern of target marketing
- vulnerable or disadvantaged consumers are targeted with controversial or potentially harmful products.
Socially responsible target marketing should be done to serve both the interests of the company and the interests of those targeted.
Differentiation and positioning
Product position: consumer perception of products & place the product occupies in minds of consumers relative to competitors.
Price goes up —> quality goes up.
perceptual maps are often used by firms to determine how they would like to be perceived relative to competitors, based upon two variables (usually price and quality).
Firms must decide which segments to target and on the value proposition.
Product position if the way a product is defined by consumers on important attributes.
Choosing a differentiation and positioning strategy
Strategy involves:
1. Identifying a set of differentiating competitive advantages
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy
Identifying possible value differences and competitive advantages
Competitive advantage: an advantage over competitors gained by offering greater customer value either by having lover prices or providing more benefits that justify higher prices.
Firms can differentiate in terms of product, services, channels, people, or image.
Choosing the right competitive advantage
Number of differences to promote:
Developing a unique selling proposition (USP) for each brand and sticking to it.
Positioning on more than one differentiator.
Which differences to promote
Important, distinctive, superior, communicable, preemptive, affordable, profitable
Winning value propositions
More for more: provides the most upscale product or service
More for the same: high quality at lower prices
More for less: best winning proposition
The same for less: gives a good deal
Less for much less: meeting consumers’ lower performance or quality requirements at a lower price.
Developing a positioning statement
Company/brand positioning should be summed up in a positioning statement and should take the following form:
Format: to (target segment and need) (our brand) is (a concept) that (point of difference).
Example: to busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that gives you an easier more reliable way to stay connected to data, people, and resources while on the go.
Communicating and delivering the chosen position
All the company’s marketing mix efforts must support the positioning strategy.
Maintain the position obtained through consistent performance and communication.
The product’s position should be monitored and adapted over time.
