Lecture 5: Customer-Driven Marketing Strategy: Creating Value for target customers

Question 1

Why segment the market?

Answer 1

Companiesrecognizethey cannot appeal to all consumers in the marketplace
- Too many consumers, too widely scattered, too varied in needs
- Lack resourcesto serve all consumers

Question 2

Customer value-driven marketing strategy

Answer 2

1. Segmentation – Dividing the market into distinct groups based on demographics, behavior, or needs
   • A skincare brand segments customers by skin type (oily, dry, sensitive)
   2. Targeting – Selecting the segment(s) to focus on
      • The brand targets people with sensitive skin by offering gentle, fragrance-free products
   3. Differentiation – Creating unique product features or services to stand out
      • Promoting dermatologist-tested formulas as a key selling point
   4. Positioning – Establishing a clear brand image in the customer’s mind
      • Positioning the brand as the #1 choice for sensitive skin in marketing campaigns

Question 3

Step 1: Market segmentation

Answer 3

Market segmentation divides consumers into distinct groups based on their needs and characteristics, requiring different marketing strategies

1.	**Geographic Segmentation** – Based on location (e.g., country, city, neighborhood)

2.	**Demographic Segmentation** – Based on factors like age, gender, income, occupation, and religion

3.	**Psychographic Segmentation** – Based on lifestyle and personality traits

4.	**Behavioural Segmentation** – Based on consumer interactions with the product, including:
•	Occasions (when they buy)
•	Benefits sought (what they value)
•	User status (nonuser, first-time, regular)
•	Usage rate (light, medium, heavy users)

Question 4

Step 2: Select target segments

Answer 4

Choosing a group of consumers with shared needs or characteristics to focus on

Evaluating Target Segments:
• Size and Growth: Choose the largest, fastest-growing, and most profitable segments
• Segment Structural Attractiveness: Consider factors like few competitors and lack of substitutes
• Company Objectives and Resources: Ensure the company has the resources to succeed in the segment

Market Coverage Strategies:
• Undifferentiated (Mass) Marketing: Target the entire market with one offer (e.g., sugar)
• Differentiated Marketing: Target multiple segments with different offers (e.g., airline seats)
• Concentrated (Niche) Marketing: Focus on a large share of one or a few segments (e.g., Rolex watches)
• Micromarketing: Tailor products to individual needs (e.g., custom-made shoes)

Question 5

Step 3: Differentiation

Answer 5

Competitive advantage is an advantage over competitors gained by offering greater customervalue, either by having lower prices or by providing more benefits that justify higher prices

  1.  **Product Differentiation**: Unique features or quality that make the product stand out
•     Apple’s design and exclusive features

2.	**Service Differentiation**: Superior customer service or support
•	Zappos’ free returns and 24/7 support

3.	**Price Differentiation**: Offering products at various price points or based on perceived value
•	Example: Airlines’ economy, business, and first-class options

4.	**Channel Differentiation**: Unique distribution methods
•	Example: Coca-Cola’s global availability

5.	**People Differentiation**: Expertise or unique identity through people involved in service delivery
•	Example: Renowned chefs at high-end restaurants

6.	**Image Differentiation**: Building a strong brand image to create emotional connections
•	Example: Nike’s “Just Do It” and athlete endorsements

Question 6

Step 4: Selecting an overall positioning strategy

Answer 6

(Benefits, price)

  1.	More for More
•	Offers the most upscale product or service
•	Charges higher prices to cover the added cost
•	Luxury brands like Rolex

2.	More for the Same
•	Provides high quality at a lower price
•	Often used to challenge higher-priced competitors
•	Brands offering premium features at affordable prices

3.	The Same for Less
•	Offers a good deal at a lower price
•	Common in discount stores leveraging purchasing power and efficiency
•	Walmart offering similar products at lower prices

4.	Less for Much Less
•	Provides lower performance or quality at a significantly lower price
•	Budget brands offering basic options at lower prices

5.	More for Less
•	The best value proposition, combining high quality and low price
•	Hard to maintain, but could be seen in brands like Costco

Question 7

Positioning statement & Positioning map

Answer 7

• To (target segment), our (brand) is (concept) that (pointof ?)
  
  • For serious athletes, Nike gives confidence that provides the perfect shoe for every sport

shows consumer perceptions of its brand verses competitors’ brands based on important buying dimensions