Chapter6: Customer Value-driven Marketing Strategy: Creating Value For Target Customers

Question 1

Marketing strategy

Answer 1

Segmentation, market targeting, differentiation, positioning

Question 2

Designing a customer value-driven market strategy

Answer 2

How do we create value for targeted customers?

1. Select customers to serve
   - segmentation: divide the total market into smaller segments
   - targeting: select the segment or segments to enter
2. 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

Question 3

Major segmentation variables for consumer markets

Answer 3

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.

Question 4

Geographic segmentation

Answer 4

Dividing a market into different geographical unit such as nations, states, regions, counties, cities, or neighbourhoods.

Question 5

Demographic segmentation

Answer 5

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.

Question 6

Psychographic segmentation

Answer 6

Marketers segment their makers using variables such as social class, lifestyle, personality characteristics.

The products people buy reflect their lifestyles.

Question 7

Behavioural segmentation

Answer 7

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.

Question 8

Multiple segmentation bases

Answer 8

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.

Question 9

Segmenting business markets

Answer 9

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.

Question 10

Operating variables

Answer 10

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?

Question 11

Purchasing approaches

Answer 11

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?

Question 12

Situational factors

Answer 12

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?

Question 13

Personal characteristics

Answer 13

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?

Question 14

Segmenting international markets

Answer 14

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.

Question 15

Requirements for effective segmentation

Answer 15

Measurable, accessible, substantial, differentiate, actionable.

Question 16

Market targeting

Answer 16

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.

Question 17

Market-targeting strategies

Answer 17

Targeting broadly ————————> targeting narrowly
Undifferentiated (mass) marketing —> differentiated (segmented) marketing —> concentrated (niche) marketing —> micro marketing (local or individual marketing).

Question 18

Market targeting vs Target marketing

Answer 18

1. Market targeting

Evaluating segments — profitability? Growth? Corporate objectives?
Selecting segments

2. Target marketing
   Undifferentiated marketing
   Differentiated marketing
   Niche marketing
   Micro marketing

Question 19

Market targeting

Answer 19

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.

Question 20

Evaluating market segments

Answer 20

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

Question 21

Selecting target market segments

Answer 21

1. 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)
2. 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.
3. Concentrated marketing (niche marketing): firm goes after a large share of one or a few segments or niches.
4. 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.

Question 22

Choosing a targeting strategy

Answer 22

Factors to consider: company resources, product variability, product’s life-cycle stage, market variability, competitors’ marketing strategies.

Question 23

Socially responsible target marketing

Answer 23

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.

Question 24

Differentiation and positioning

Answer 24

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.

Question 25

Choosing a differentiation and positioning strategy

Answer 25

Strategy involves:
1. Identifying a set of differentiating competitive advantages
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy

Question 26

Identifying possible value differences and competitive advantages

Answer 26

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.

Question 27

Choosing the right competitive advantage

Answer 27

Number of differences to promote:

Developing a unique selling proposition (USP) for each brand and sticking to it.
Positioning on more than one differentiator.

Question 28

Which differences to promote

Answer 28

Important, distinctive, superior, communicable, preemptive, affordable, profitable

Question 29

Winning value propositions

Answer 29

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.

Question 30

Developing a positioning statement

Answer 30

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.

Question 31

Communicating and delivering the chosen position

Answer 31

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.