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key steps in designing a customer-driven market strategy

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market segmentation, market targeting, differentiation, and market positioning.

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Market segmentation

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provides a method to divide or segment the market into narrow segments that can be better reached with the resources of the marketer.

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Market targeting

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examines each of the designated segment's attractiveness and chooses one or more that match the marketing desires and objectives of the organization. Various coverage strategies are explained and detailed.

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The concept of market positioning

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arranges for a product to occupy a clear, distinctive, and desirable place relative to competition.

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Most companies have moved away from mass marketing and toward

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marketing segmentation and target marketing

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Major steps in target marketing

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1. market segmentation, 2. target marketing 3. differentiation 4.market positioning

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differentiation

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differentiating the firm's market offering to create superior customer value

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Marketing positioning

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setting the competitive positioning for the product and creating a detailed marketing mix

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how are buyer different

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wants, resources, locations, buying attitudes, and buying practices

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How do companies use marketing segmentation

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companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

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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. Many companies today are localizing their products, advertising, promotion, and sales efforts to fit the needs of individual regions, cities, and even neighborhoods.

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Demographic segmentation

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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. a. Demographic factors are the most popular basis for segmenting customer groups. One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. Another is that demographic variables are easier to measure than most other types of variables.

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age and life-cycle segmentation

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offering different products or using different marketing approaches for different age and life-cycle groups. Marketers must be careful to guard against stereotypes when using age and life-cycle segmentation. Age is often a poor predictor of a person's life cycle, health, work or family status, needs, and buying power.

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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, boats, clothing, cosmetics, financial services, and travel. Many companies target affluent consumers with luxury goods and convenience services. Many retailers successfully target lower income groups.

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Psychographic segmentation

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divides buyers into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic group can have very different psychographic makeup. Marketers often segment their markets by consumer lifestyles.

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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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powerful form of segmentation is to group buyers

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according to the different benefits that they seek from the product

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Benefit segmentation

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requires finding the major benefits people look for in their product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.

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Markets can be segmented into groups of

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nonusers, ex-users, potential users, first-time users, and regular users of a product, light, medium, and heavy product users

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segmented by consumer loyalty

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Consumers can be loyal to brands, stores, and companies. Buyers can be divided into groups according to their degree of loyalty. By studying its less loyal buyers, the company can detect which brands are most competitive with its own.

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Marketers rarely limit their segmentation analysis to

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only one or a few variables. They are increasingly using multiple segmentation bases in an effort to identify smaller, better defined target groups.

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"geodemographic" segmentation

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multivariable segmentation, Several business information services have arisen to help marketing planners link U.S. census and consumer transaction data with consumer lifestyle patterns to better segment their markets down to zip codes, neighborhoods, and even city blocks.

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leading lifestyle segmentation systems

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is the PRIZM "You Are Where You Live" system by Claritas. The PRIZM system marries a host of demographic factors—such as age, educational level, income, occupation, family composition, ethnicity, and housing—with buying transaction data and lifestyle information taken from consumer surveys.

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Consumer and business marketers use many of the same variables

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to segment their markets.

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Business buyers can be segmented

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geographically, demographically (industry, company size), or by benefits sought, user status, usage rate, and loyalty status.

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business marketers also use some additional variables

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such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.

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many marketers believe that

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buying behavior and benefits provide the best basis for segmenting business markets

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Different countries, even those that are close together

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can vary greatly in their economic, cultural, and political makeup.

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International market segmentation

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geographic location, cultural factors,

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Geographic segmentation assumes

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that nations close to one another will have many common traits and behaviors. Although this is often the case, there are many exceptions

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World markets

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can also be segmented on the basis of economic factors. Countries might be grouped by population income levels or by their overall level of economic development.

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Countries can be segmented by

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political and legal factors such as the type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.

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Cultural segmentation

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common languages, religions, values and attitudes, customs, and behavioral patterns.

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intermarket segmentation

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Using this approach, they form segments of consumers who have similar needs and buying behavior even though they are located in different countries.

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To be useful market segments must be

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Measurable, accessible, substantial, differential, accountable

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Measurable

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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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Differential

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The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs

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Accountable

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Effective programs can be designed for attracting and serving the segments

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Market segmentation reveals

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the firm's market segment opportunities

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Market targeting

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The firm now has to evaluate the various segments and decide how many and which segments it can serve best.

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In evaluating different market segments, a firm must look at three factors:

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segment size and growth, segment structural attractiveness, and company objectives and resources

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A segment is less attractive if

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it already contains many strong and aggressive competitors

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The existence of many actual or potential substitute products

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may limit prices and the profits that can be earned in a segment

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The relative power of buyers

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also affects segment attractiveness.

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A segment may be less attractive if

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it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services

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Even if a segment has the right size and growth and is structurally attractive, the company must consider

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its own objectives and resources

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A target market consists of

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

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undifferentiated marketing (or mass-marketing) strategy

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a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different.

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Using a differentiated marketing (or segmented marketing) strategy

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a firm decides to target several market segments and designs separate offers for each

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By offering product and marketing variations to segments, companies hope for

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higher sales and a stronger position within each market segment

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Developing a stronger position within several segments creates more

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total sales than undifferentiated marketing across all segments

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differentiated marketing

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also increases the costs of doing business. Developing separate marketing plans for the separate segments requires extra marketing research, forecasting, sales analysis, promotion, planning, and channel management.

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concentrated marketing (or niche marketing)

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is especially appealing when company resources are limited. Instead of going after a small share of a large market, the firm goes after a large share of one or a few segments or niches.

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concentrated marketing, the firm achieves a

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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.

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Niching offers smaller companies an opportunity to compete by

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focusing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors.

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Concentrated marketing can be

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highly profitable, highly risky, Companies that rely on one or a few segments for all of their business will suffer greatly if the segment turns sour. Or large competitors may decide to enter the same segment with greater resources.

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Micromarketing is

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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.

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Local marketing involves

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tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, and even specific stores.

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Local marketing has some drawbacks

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It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different regional and local markets. The advantages of local marketing often outweigh the drawbacks.

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The best target marketing strategy

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depends on Company resources Product variability Product life-cycle stage Market variability Competitor's marketing strategies

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With limited resources

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concentrated marketing makes the most sense

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Undifferentiated marketing is more suited for

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uniform products such as grapefruit or steel

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Differentiated marketing or concentrated marketing is more suited

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Products that can vary in design, such as cameras and cars

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product's life-cycle stage also must be considered

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When a firm introduces a new product, it may be practical to launch only one version, and undifferentiated marketing or concentrated marketing may make the most sense.

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market variability

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If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated marketing is appropriate.

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competitors' marketing strategies

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When competitors use differentiated or concentrated marketing, undifferentiated marketing can be suicidal

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Smart targeting helps companies to be more

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efficient and effective by focusing on the segments that can satisfy best and most profitably

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biggest issues usually involve the targeting of

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vulnerable or disadvantaged consumers with controversial or potentially harmful products.

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In target marketing, the issue is

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not really who is targeted by rather how and for what. Controversies arise when marketers attempt to profit at the expense of targeted segments.

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Socially responsible marketing

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calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.

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A product's position

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is the way the product is defined by consumers on important attributes—the place the product occupies in consumers' minds relative to competing products. Positioning involves implanting the brand's unique benefits and differentiation in customers' minds.

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A product's position

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is the complex set of perceptions, impressions, and feelings that consumers have for the product compared with competing products.

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Positioning maps

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Marketers often prepare perceptual positioning maps that show consumer perceptions of their brand versus competing products on important buying dimensions.

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to find points of differentiation

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marketers must think through the customer's entire experience with the company's product or service

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Product differentiation takes place

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along a continuum. At one extreme we find physical products that allow little variation: chicken, steel, and aspirin. At the other extreme are products that can be highly differentiated, such as autos, clothing, and furniture. Such products are differentiated on features, performance, style, or design.

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Not all brand differences are meaningful or worthwhile; not every difference makes a good differentiator. A difference is worth establishing to the extent that it satisfies the following criteria

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1. Important—the difference delivers a highly valued benefit to target buyers. 2. Distinctive—competitors do not offer the difference, or the company can offer it in a more distinctive way. 3. Superior—the difference is superior to other ways that customers might obtain the same benefit. 4. Communicable—the difference is communicable and visible to buyers. 5. Preemptive—competitors cannot easily copy the difference. 6. Affordable—buyers can afford to pay for the difference. 7. Profitable—the company can introduce the difference profitably.

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The positioning task consists of three steps

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To build profitable relationships with target customers, marketers must understand customer needs better than competitors do and deliver more value. To the extent that a company can position itself as providing superior value, it gains competitive advantage.

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brand's value proposition

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the full mix of benefits upon which the brand is positioned

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"More for more" positioning

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involves providing the most upscale product or service and charging a higher price to cover the higher costs. In general, companies should be on the lookout for opportunities to introduce a "much-more-for-much-more" brand in any underdeveloped product or service category.

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"Less-for-much-less" positioning

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involves meeting consumers' lower performance or quality requirements at a much lower price.

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"same for less"

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can be a powerful value proposition—everyone likes a good deal.

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"more for the same."

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Companies can attack a competitor's more-for-more positioning by introducing a brand offering comparable quality but at a lower price.

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"more for less."

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winning value proposition, Many companies claim to do this. Yet in the long run, companies will find it difficult to sustain such best-of-both positioning. Offering more usually costs more, making it difficult to deliver on the "for less" promise. Companies that try to deliver both may lose out to more focused competitors.

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Each brand must adopt a positioning strategy designed to

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serve the needs and wants of its target market.

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The important thing is that each company must develop its own winning positioning strategy, one that

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makes it special to its target consumers. Offering only "the same for the same" provides no competitive advantage, leaving the firm in the middle of the pack.

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Company and brand positioning should be summed up in a

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positioning statement. The statement should follow the form: "To (target segment and need) our (brand) is (concept) that (point of difference)." For example: "To busy professionals who need to stay organized, Palm is an electronic organizer that allows you to backup files on your PC more easily and reliably than competitive products."

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Once a company has built the desired position, which can take years to establish and moments to destroy

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it must take care to maintain it through consistent performance and communication. It must closely monitor and adapt the position over time to match changes in consumer needs and competitors' strategies.

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