Topic 4: Crafting consumer-oriented marketing strategies

Question 1

What are the four major steps in designing a customer-driven marketing strategy?

Answer 1

1. Market segmentation
2. Market targeting
3. Differentiation
4. Positioning

Question 2

What is market segmentation?

Answer 2

This is the process of dividing a market into smaller segments of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.

Question 3

What is market targeting/targeting?

Answer 3

This is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Question 4

What is differentiation?

Answer 4

This involves differentiation the markt offering to create superior customer value.

Question 5

What is positioning?

Answer 5

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.

Question 6

What are the major variables a marketer can use to segment consumer markets?

Answer 6

1. Geographic: Nations, regions, states, counties, cities, neighborhoods, population density (urban, suburban, rural), climate
2. Demographic: Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, 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.
3. Psychographic: Social class, lifestyle, personality
4. Behavioral: Occasions, benefits, user status, usage rate, loyalty status. Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses concerning a product. Many marketers believe that behavior variables are the best starting point for building market segments.

Question 7

What is intermarket (cross-market) segmentation?

Answer 7

This is the process of forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries.

Question 8

What are the requirements for effective segmentation?

Answer 8

To be useful, market segments must be:

1. Measurable. The size, purchasing power, and profiles of the segments can be measured.
2. Accessible. The market segments can be effectively reached and served.
3. 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. It would not pay, for example, for an automobile manufacturer to develop cars especially for people whose height is greater than seven feet.
4. Differentiable. The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.
5. Actionable. Effective programs can be designed for attracting and serving the segments. For example, although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment.

Question 9

What are the three factors a firm must look at when evaluating different market segments?

Answer 9

1. Segment size and growth
2. Segment structural attractiveness
3. Company objectives and resources

Question 10

What are other major structural factors tht affect long-run segment attractiveness?

Answer 10

1. 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.
2. The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment.
3. The relative power of buyers also affects segment attractiveness. Buyers with strong bargaining power relative to sellers will try to force prices down, demand more services, and set competitors against one another – all at the expense of seller profitability.
4. Finally, a segment may be less attractive if it contains powerful suppliers that can control prices or reduce the quality or quantity of ordered goods and services.

Question 11

What is a target market?

Answer 11

A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.

Question 12

What are the levels that market targeting can be carried out?

Answer 12

1. Undifferentiated/mass marketing: A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer.
2. Micromarketing: the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Rather than seeing a customer in every individual, micromarketers see the individual in every customer. Micromarketing includes local marketing and individual marketing.
   
   • Local marketing: Tailoring brands and marketing to the needs and wants of local customer segments – cities, neighborhoods, and even specific stores.
   • Individual marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.
3. Differentiated/segmented marketing: A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. At the same time, however, they do not customize their offers to each individual customer.
   
   • Concentrated (niche) marketing: A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. Through concentrated marketing, the firm achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can also market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Question 13

What are the factors companies need to consider when choosing a market-targeting stratey?

Answer 13

1. Company resources: When the firm’s resources are limited, concentrated marketing makes the most sense.
2. Degree of product variability: Undifferentiated marketing is more suited for uniform products, such as grapefruit or steel. Products that can vary in design, such as cameras and cars, are more suited to differentiation or concentration.
3. Product life cycle: When a firm introduces a new product, it may be practical to launch one version only, as undifferentiated marketing or concentrated marketing may make the most sense. In the mature stage of the product life cycle, however, differentiated marketing often makes more sense.
4. Market variability: If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.
5. Competitors’ marketing strategies: When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal. Conversely, when competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing, focusing on the needs of buyers in specific segments.

Question 14

What is a value proposition?

Answer 14

This is how a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments. This is the full positioning of a brand – the full mix of benefits on which it is positioned.

Question 15

What is a product position?

Answer 15

A product positin is the way a product is defined by consumers on important attributes – the place the product occupies in consumers’ minds relative to competing products. A product’s position is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products.

Question 16

What are the steps involved in differentiation and positioning?

Answer 16

1. Identify a set of differentiating competitive advantages on which to build a position
2. Choosing the right competititve advantages
3. Selecting an overall positioning strategy

Question 17

What is competitive advantage?

Answer 17

This is an advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices.

If a company positions its product as offering the best quality and service, it must actually differentiate the product so that it delivers the promised quality and service. Companies must do much more than simply shout out their positions with slogans and taglines. They must first live the slogan.

Question 18

In what specific ways can a company differentiate itself or its market offer?

Answer 18

It can differentiate along the lines of product, services, channels, people, or image.

• Through product differentiation, brands can be differentiated on features, performance, or style and design.
• Some companies gain services differentiation through speedy, convenient, or careful delivery.
• Firms that practice channel differentiation gain competitive advantage through the way they design their channel’s coverage, expertise, and performance.
• Companies can also gain a strong competitive advantage through people differentiation – hiring and training better people than their competitors do. People differentiation requires that a company select its customer-contact people carefully and train them well.
• Even when competing offers look the same, buyers may perceive a difference based on company or brand image differentiation. A company or brand image should convey a product’s distinctive benefits and positioning. Developing a strong and distinctive image calls for creativity and hard work.

Question 19

What are some of the considerations to make when choosing the right competitive advantages?

Answer 19

1. How many differences to promote.
2. Which differences to promote. A difference is worth establishing to the extent that it satisfies the following criteria:
   
   • Important. The difference delivers a highly valued benefit to target buyers.
   • Distinctive. Competitors do not offer the difference, or the company can offer it in a more distinctive way.
   • Superior. The difference is superior to other ways that customers might obtain the same benefit.
   • Communicable. The difference is communicable and visible to buyers.
   • Preemptive. Competitors cannot easily copy the difference.
   • Affordable. Buyers can afford to pay for the difference.
   • Profitable. The company can introduce the difference profitably.

Question 20

What are the five winning value propositions?

Answer 20

1. More for more: More-for-more positioning 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. It symbolizes status and a loftier lifestyle. Although more-for-more can be profitable, this strategy can also be vulnerable. It often invites imitators who claim the same quality but at a lower 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.
3. More for less: Best strategy but not sustainable.
4. 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 Best Buy, PetSmart, David’s Bridal, and DSW Shoes use this positioning. They don’t claim to offer different or better products. Instead, they offer many of the same brands as department stores and specialty stores but at deep discounts based on superior purchasing power and lower-cost operations.
5. 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.

Question 21

What is a positioning statement?

Answer 21

This is a tatement that summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference).

Question 22

Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning.

Answer 22

A customer-driven marketing strategy begins with selecting which customers to serve and determining a value proposition that best serves the targeted customers. It consists of four steps. Market segmentation is the act of dividing a market into distinct segments of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes. Once the groups have been identified, market targeting evaluates each market segment’s attractiveness and selects one or more segments to serve. Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of positioning the market offering in the minds of target customers. A customer-driven marketing strategy seeks to build the right relationships with the right customers.

Question 23

List and discuss the major bases for segmenting consumer and business markets.

Answer 23

There is no single way to segment a market. Therefore, the marketer tries different variables to see which give the best segmentation opportunities. For consumer marketing, the major segmentation variables are geographic, demographic, psychographic, and behavioral. In geographic segmentation, the market is divided into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. In demographic segmentation, the market is divided into groups based on demographic variables, including age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. In psychographic segmentation, the market is divided into different groups based on social class, lifestyle, or personality characteristics. In behavioral segmentation, the market is divided into groups based on consumers’ knowledge, attitudes, uses, or responses concerning a product.

Business marketers use many of the same variables to segment their markets. But business markets also can be segmented by business demographics (industry, company size), operating characteristics, purchasing approaches, situational factors, and personal characteristics. The effectiveness of the segmentation analysis depends on finding segments that are measurable, accessible, substantial, differentiable, and actionable.

Question 24

Explain how companies identify attractive market segments and choose a market-targeting strategy.

Answer 24

To target the best market segments, the company first evaluates each segment’s size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four market-targeting strategies – ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated (or mass) marketing. This involves mass producing, mass distributing, and mass promoting the same product in about the same way to all consumers. Or the seller can adopt differentiated marketing – developing different market offers for several segments. Concentrated marketing (or niche marketing) involves focusing on one or a few market segments only. Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product life-cycle stage, market variability, and competitive marketing strategies.

Question 25

Discuss how companies differentiate and position their products for maximum competitive advantage.

Answer 25

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.

The brand’s full positioning is called its value proposition – the full mix of benefits on which the brand is positioned. In general, companies can choose from one of five winning value propositions on which to position their products: more for more, more for the same, the same for less, less for much less, or more for less. Company and brand positioning are summarized in positioning statements that state the target segment and need, the positioning concept, and specific points of difference. The company must then effectively communicate and deliver the chosen position to the market.