Chapter 6 Customer Driven Marketing Strategy: Creating Value for Target Customers

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In concept, marketing boils down to two questions:
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1. Which customers will we serve? 2. How will we serve them?
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4 major steps in designing a customer-driven marketing strategy:
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1. Market Segmentation 2. Market Targeting 3. Differentiation 4. Positioning
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Market Segmentation:
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Involves dividing a market into smaller groups of buyers with distinct needs, characteristics or behaviors that might require separate marketing strategies or mixes
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Market Targeting:
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Consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter
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Differentiation:
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Involves actually differentiating the firm’s market offering to create superior customer value
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Positioning:
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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
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Types of Market Segmentation –
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1. Geographic Segmentation 2. Demographic Segmentation 3. Psychographic Segmentation 4. Behavioral Segmentation
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Geographic Segmentation –
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calls for dividing the market into different geographical units such as nations, regions, states, counties, cities or even neighborhoods
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Demographic Segmentation (Most Popular) –
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Divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation and nationality
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Types of Demographic Segmentation –
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1. Age and Life-Cycle Stage 2. Gender Segmentation 3. Income Segmentation
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Age and Life-Cycle Stage:
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offering different products or using different marketing approaches for different age and life-cycle groups
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Gender Segmentation:
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has long been used in clothing, cosmetics, toiletries and magazines
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Income segmentation:
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has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services and travel
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Psychographic Segmentation
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divides buyers into different groups based on social class, lifestyle or personality characteristics
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Behavioral Segmentation:
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divides buyers into groups based on their knowledge, attitudes, uses or responses to a product
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Types of Behavioral Segmentation:
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1. Occasion Segmentation 2. Benefit Segmentation 3. User Status 4. Usage Rate 5. Loyalty Status
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Occasion Segmentation:
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grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item
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Benefit Segmentation:
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grouping buyers according to the different benefits that they seek from the products
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User Status:
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segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product
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Usage Rate:
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grouping markets into light, medium and heavy product users
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Loyalty Status:
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dividing buyers into groups according to their degree of loyalty
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Using Multiple Segmentation bases –
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Marketers rarely limit their segmentation analysis to only one or a few variables
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PRIZM –
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Leading segmentation systems that classifies every American household based on a host of demographic factors
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Segmenting Business Markets –
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Consumer and business marketers use many of the same variables to segment their markets
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Business Markets also use –
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1. Operating Characteristics 2. Purchasing Approaches 3. Situational Factors 4. Personal Characteristics
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Segmenting International Markets variables:
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1. Geographic Factors 2. Economic Factors 3. Political and Legal Factors 4. Cultural Factors
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Int’l Geographic Factors
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Nations close to one another will have many common traits and behaviors.(But not always – be careful here)
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Int’l Economic Factors:
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Countries may be grouped by population income levels or by their overall level of economic developement
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Int’l Political and legal factors:
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Type and stability of government, receptivity to foreign firms, monetary regulations and the amount of bureaucracy
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Int’l Cultural factors:
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Grouping markets according to common languages, religions, values and attitudes, customs and behavioral patterns
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Intermarket Segmentation:
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segmenting of consumers who have similar needs and buying behavior even though they are located in different countries
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Requirements for Effective Segmentation:
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1. Measurable 2. Accessible 3. Substantial 4. Differentiable 5. Actionable
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Measureable:
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The size, purchasing power and profiles of the segments can be measured
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Accessible:
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The market segments can be effectively reached and served
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Substantial:
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The market segments are large or profitable enough to serve
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Differentiable:
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The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs
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Actionable:
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Effective programs can be designed for attracting and serving the segmants
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Evaluating Market Segments; firm must look at 3 factors
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1. Segment size and growth 2. Segment structural attractiveness 3. Company Objectives and resources
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Target Market:
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A set of buyers sharing common needs or characteristics that the company decides to serve
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The largest, fastest-growing segments are…
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not always the most attractive ones for every company
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A company also needs to examine ___ ___ ___ that affect long-run segment attractiveness.
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major structural factors
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A segment is ___ ___ if it already contains many strong and aggressive competitors.
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less attractive
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The existence of many actual or potential ___ ___ products may limit prices and profits.
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substitute products
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The relative ___ __ ___ also affects segment attractiveness
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power of buyers
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A segment may be less attractive if it contains ___ ___ who can control prices.
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powerful suppliers
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4 Market Targeting Strategies –
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1. Undifferentiated Marketing 2. Differentiated Marketing 3. Concentrated Marketing 4. Micromarketing
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Undifferentiated Marketing (Mass Marketing):
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Using this strategy, a firm might decide to ignore market segment differences and target the whole market with one offer
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This mass-marketing strategy focuses on what is ___ in the needs of consumers rather than on what is ___.
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common; different
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Differentiated Marketing (Segmented Marketing):
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Using this strategy, a firm decides to target several market segments and designs separate offers for each
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Concentrated Marketing (Niche Marketing):
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Using this strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches.
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Micromarketing:
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practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations
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Micromarketing includes:
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1. Local Marketing 2. Individual Marketing
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Local Marketing –
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involves tailoring brand and promotions to the needs and wants of local customer groups – cities, neighborhoods and even specific stores
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Local Marketing does of drawbacks…
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– it can drive up manufacturing and marketing costs by reducing economies of scale – it can create logistics problems – the brand’s overall image might be diluted if the product and message vary too much in different localitites
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Individual Marketing –
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the tailoring of products and marketing programs to the needs and preferences of individual customers
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Individual Marketing has also been labeled –
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1. One-to-one marketing 2. Mass customization 3. markets-of-one marketing
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Mass Customization –
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is the process by which firms interact one-to-one with masses of customers to design products and services tailor-made to individual needs such as via cell phones or social media
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Choosing the best Targeting Strategy depends on…
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-Company resources -Product variability – Product’s life-cycle stage – Market variability – Competitors’ Marketing Strategies
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Socially responsible marketing calls for…
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segmentation and targeting that serve not just the interests of the company, but also the interests of those targeted. Marketing generates concern when targeting: -Vulnerable, minority or disadvantaged populations -Children and teens -Controversy arises when an attempt is made to profit at the expense of these segments
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Value Proposition:
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How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segements
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A product’s positions is…
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the way the product is defined by consumers on important attributes
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Perceptual positioning map –
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shows consumers perceptions of their brands versus competing products on important buying dimensions
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The differentiation and positioning task consists of 3 steps:
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1. Identifying a set of differentiating competitive advantages upon which to build a position 2. Choosing the right competitive advantages 3. Selecting an overall positioning strategy
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Competitive advantage –
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An advantage over competitors gained by offering greater customer value, either by having lower prices or providing more benefits that justify higher prices
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A company can differentiate along the lines of …
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product, services, channels, people or image
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Unique Selling Proposition (USP)…
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is what ad man Rosser Reeves believes a company should develop for each brand and stick to it
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Choose the right competitive advantage…
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Choose weather to promote a single benefit or multiple benefits
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Promote differences that are:
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1. Important 2. Distinctive 3. Superior 4. Communicable 5. Preemptive 6. Affordable 7. Profitable
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Important:
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The difference delivers a highly valued benefit to target buyers
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Distinctive:
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Competitiors do not offer the difference, or the company can offer it in a more distinctive way
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Superior:
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The difference is superior to other ways that customers might obtain the same benefit
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Communicable:
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The difference is communicable and visible to buyers
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Preemptive:
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Competitors cannot easily copy the difference
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Affordable:
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Buyers can afford to pay for the difference
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Profitable:
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The company can introduce the difference profitably
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The full positioning of a brand is called the brand’s___ ___.
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value proposition
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Winning Value Propostions
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1. More for More 2. More for the same 3. the same for less 4. Less for Much less 5. More for less
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More for More –
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Provide the most upscale product and charge a higher price to cover the higher costs
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More for the Same –
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Attack a competitor’s positioning by introducing a brand offering comparable quality at a lower price
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The Same for Less –
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Offer similar products at much reduced prices
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Less for Much Less –
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Meet consumers’ lower performance or quality requirements at a much lower price
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More for Less –
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Offer the best products at the lowest prices
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Developing a Positioning Statement
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-A statement that summarizes company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference) -All the company’s marketing mix efforts must support the chosen positioning strategy

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